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. That said, here is one small-cap stock that could be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Pitney Bowes (PBI)
Market Cap: $2.26 billion
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE: PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Why Are We Hesitant About PBI?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.8% annually over the last five years
- Forecasted revenue decline of 3.1% for the upcoming 12 months implies demand will fall even further
At $15.68 per share, Pitney Bowes trades at 10.1x forward P/E. If you’re considering PBI for your portfolio, see our FREE research report to learn more.
Essent Group (ESNT)
Market Cap: $6.01 billion
Serving as a crucial bridge between homebuyers and the American dream of homeownership, Essent Group (NYSE: ESNT) provides private mortgage insurance and title services that enable lenders to offer home loans with down payments of less than 20%.
Why Does ESNT Give Us Pause?
- Sluggish 2.7% annualized growth in net premiums earned over the last five years indicates the firm trailed its insurance peers
- Costs have risen faster than its revenue over the last two years, causing its pre-tax profit margin to decline by 9 percentage points
- Performance over the past two years shows its incremental sales were less profitable, as its 3% annual earnings per share growth trailed its revenue gains
Essent Group is trading at $63.94 per share, or 1x forward P/B. To fully understand why you should be careful with ESNT, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
The Bancorp (TBBK)
Market Cap: $2.51 billion
Operating behind the scenes of many popular fintech apps and prepaid cards you might use daily, The Bancorp (NASDAQ: TBBK) is a bank holding company that specializes in providing banking services to fintech companies and offering specialty lending products.
Why Are We Bullish on TBBK?
- 12.6% annual net interest income growth over the last five years surpassed the sector average as its loans resonated with borrowers
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
The Bancorp’s stock price of $60.03 implies a valuation ratio of 3.3x forward P/B. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
