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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Bloomin' Brands (BLMN)
Market Cap: $586.3 million
Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ: BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Is BLMN Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $6.96 per share, Bloomin' Brands trades at 7x forward P/E. To fully understand why you should be careful with BLMN, check out our full research report (it’s free for active Edge members).
Novanta (NOVT)
Market Cap: $4.09 billion
Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ: NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.
Why Are We Wary of NOVT?
- Annual revenue growth of 4% over the last two years was below our standards for the industrials sector
- Flat earnings per share over the last two years lagged its peers
- Free cash flow margin dropped by 3.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Novanta’s stock price of $114.13 implies a valuation ratio of 32.3x forward P/E. Check out our free in-depth research report to learn more about why NOVT doesn’t pass our bar.
One Small-Cap Stock to Buy:
GitLab (GTLB)
Market Cap: $6.37 billion
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Should You Buy GTLB?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Prominent and differentiated software culminates in a best-in-class gross margin of 88%
- Robust free cash flow margin of 26.6% gives it many options for capital deployment
GitLab is trading at $37.85 per share, or 6.7x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
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 6 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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