Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here is one small-cap stock that could be the next 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
Petco (WOOF)
Market Cap: $737.1 million
Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ: WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.
Why Do We Pass on WOOF?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Petco’s stock price of $2.64 implies a valuation ratio of 16.1x forward P/E. Dive into our free research report to see why there are better opportunities than WOOF.
Proto Labs (PRLB)
Market Cap: $1.11 billion
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Should You Dump PRLB?
- Sales trends were unexciting over the last two years as its 2.4% annual growth was below the typical industrials company
- Earnings per share have dipped by 8.7% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up
Proto Labs is trading at $46.82 per share, or 29.1x forward P/E. Read our free research report to see why you should think twice about including PRLB in your portfolio.
One Small-Cap Stock to Watch:
SentinelOne (S)
Market Cap: $5.22 billion
Built on the principle of "fighting machine with machine," SentinelOne (NYSE: S) provides an AI-powered cybersecurity platform that autonomously prevents, detects, and responds to threats across endpoints, cloud workloads, and identity systems.
Why Does S Stand Out?
- Customers view its software as mission-critical to their operations as its ARR has averaged 26.3% growth over the last year
- Forecasted revenue growth of 21.3% for the next 12 months indicates its momentum over the last two years is sustainable
- Adequate gross margin of 75% gives it sufficient room to spend on marketing and product development
At $15.81 per share, SentinelOne trades at 4.8x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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