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 are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.
One Small-Cap Stock to Sell:
Oshkosh (OSK)
Market Cap: $9.12 billion
Oshkosh (NYSE: OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.
Why Do We Think Twice About OSK?
- Backlog growth averaged a weak 1.3% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
- High input costs result in an inferior gross margin of 16.4% that must be offset through higher volumes
- 7.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $142.45 per share, Oshkosh trades at 12.7x forward P/E. Read our free research report to see why you should think twice about including OSK in your portfolio.
Two Small-Cap Stocks to Watch:
Braze (BRZE)
Market Cap: $2.89 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 Do We Like BRZE?
- Customers view its software as mission-critical to their operations as its ARR has averaged 23.1% growth over the last year
- Estimated revenue growth of 18.5% for the next 12 months implies its momentum over the last three years will continue
- Operating margin improvement of 8.5 percentage points over the last year demonstrates its ability to scale efficiently
Braze is trading at $26.10 per share, or 3.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Live Oak Bancshares (LOB)
Market Cap: $1.72 billion
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE: LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
Why Is LOB a Top Pick?
- Impressive 20.9% annual net interest income growth over the last five years indicates it’s winning market share this cycle
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 51.2% outpaced its revenue gains
- Impressive 11.4% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
Live Oak Bancshares’s stock price of $37.70 implies a valuation ratio of 1.5x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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 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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