Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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 could be down big.
Two Small-Cap Stocks to Sell:
RingCentral (RNG)
Market Cap: $2.40 billion
Founded in 1999 during the dot-com era, RingCentral (NYSE: RNG) provides software as a service that unifies phone, text, fax, video calls and chat in one platform.
Why Are We Hesitant About RNG?
- Offerings struggled to generate meaningful interest as its average billings growth of 6.7% over the last year did not impress
- Estimated sales growth of 5% for the next 12 months implies demand will slow from its three-year trend
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
RingCentral is trading at $26.71 per share, or 1x forward price-to-sales. If you’re considering RNG for your portfolio, see our FREE research report to learn more.
Bloomin' Brands (BLMN)
Market Cap: $808.9 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 Are We Out on BLMN?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Sales are projected to tank by 4.8% over the next 12 months as demand evaporates further
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $9.51 per share, Bloomin' Brands trades at 7.3x forward P/E. Dive into our free research report to see why there are better opportunities than BLMN.
One Small-Cap Stock to Buy:
Magnite (MGNI)
Market Cap: $2.64 billion
Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ: MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.
Why Do We Love MGNI?
- Annual revenue growth of 33.3% over the last five years was superb and indicates its market share increased during this cycle
- Robust free cash flow margin of 23.6% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
- Rising returns on capital show the company is starting to reap the benefits of its past investments
Magnite’s stock price of $18.60 implies a valuation ratio of 21x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking 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 Kadant (+351% 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
