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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two best left ignored.
Two Small-Cap Stocks to Sell:
Greenbrier (GBX)
Market Cap: $1.29 billion
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE: GBX) supplies the freight rail transportation industry with railcars and related services.
Why Does GBX Give Us Pause?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Gross margin of 13.9% reflects its high production costs
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $41.77 per share, Greenbrier trades at 4.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than GBX.
Ready Capital (RC)
Market Cap: $481.5 million
Operating as one of only 17 non-bank Small Business Lending Companies with preferred lender status from the SBA, Ready Capital (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, and services commercial real estate loans, small business loans, and other real estate investments.
Why Do We Avoid RC?
- Annual net interest income growth of 4.9% over the last five years was below our standards for the banking sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 17.4% annually while its revenue grew
- Annual tangible book value per share declines of 6.9% for the past five years show its capital management struggled during this cycle
Ready Capital is trading at $2.95 per share, or 0.3x forward P/B. Read our free research report to see why you should think twice about including RC in your portfolio.
One Small-Cap Stock to Buy:
EXL (EXLS)
Market Cap: $6.21 billion
Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ: EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.
Why Is EXLS a Good Business?
- Annual revenue growth of 16% over the last five years was superb and indicates its market share increased during this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 24.4% to outpace its revenue gains
- Robust free cash flow margin of 11.7% gives it many options for capital deployment
EXL’s stock price of $38.78 implies a valuation ratio of 18.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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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