Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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 are two small-cap stocks that could be the next big thing and one best left ignored.
One Small-Cap Stock to Sell:
Lemonade (LMND)
Market Cap: $4.20 billion
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Why Are We Hesitant About LMND?
- Earnings per share were flat over the last four years and fell short of the peer group average
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 183% annually over the last five years
- Push for growth has led to negative returns on capital, signaling value destruction
Lemonade is trading at $56.99 per share, or 9.1x forward P/B. Dive into our free research report to see why there are better opportunities than LMND.
Two Small-Cap Stocks to Watch:
Braze (BRZE)
Market Cap: $2.99 billion
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Why Are We Fans of BRZE?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable three-year growth trajectory
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Braze’s stock price of $26.91 implies a valuation ratio of 3.8x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Cal-Maine (CALM)
Market Cap: $5.63 billion
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Will CALM Outperform?
- Impressive 33.9% annual revenue growth over the last three years indicates it’s winning market share
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 110% over the last three years outstripped its revenue performance
- CALM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its rising cash conversion increases its margin of safety
At $116.34 per share, Cal-Maine trades at 8.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out 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 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
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