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 amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Tennant (TNC)
Market Cap: $1.49 billion
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Should You Dump TNC?
- Sales trends were unexciting over the last two years as its 3% annual growth was below the typical industrials company
- Earnings per share fell by 2.1% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 4.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Tennant’s stock price of $80.66 implies a valuation ratio of 13.2x forward P/E. To fully understand why you should be careful with TNC, check out our full research report (it’s free).
National Bank Holdings (NBHC)
Market Cap: $1.51 billion
Operating under familiar local brands like Community Banks of Colorado, Bank Midwest, and Bank of Jackson Hole, National Bank Holdings (NYSE: NBHC) operates regional banks across Colorado, Kansas, Missouri, Wyoming, Texas, and other western states, offering commercial, business, and consumer banking services.
Why Is NBHC Not Exciting?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Net interest margin dropped by 24 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Projected 4.8 percentage point efficiency ratio increase over the next year signals its day-to-day expenses will rise
National Bank Holdings is trading at $39.96 per share, or 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than NBHC.
One Small-Cap Stock to Watch:
OSI Systems (OSIS)
Market Cap: $3.96 billion
With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ: OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.
Why Does OSIS Stand Out?
- Market share has increased this cycle as its 15.8% annual revenue growth over the last two years was exceptional
- Operating margin improvement of 2.6 percentage points over the last five years demonstrates its ability to scale efficiently
- Earnings per share have massively outperformed its peers over the last two years, increasing by 22.7% annually
At $235.20 per share, OSI Systems trades at 23.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-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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