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. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.

Two Small-Cap Stocks to Sell:

Bloomin' Brands (BLMN)

Market Cap: $586.3 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 Is BLMN Risky?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Estimated sales for the next 12 months are flat and imply a softer demand environment
3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $6.96 per share, Bloomin' Brands trades at 7x forward P/E. To fully understand why you should be careful with BLMN, check out our full research report (it’s free for active Edge members).

Novanta (NOVT)

Market Cap: $4.09 billion

Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ: NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.

Why Are We Wary of NOVT?

1. Annual revenue growth of 4% over the last two years was below our standards for the industrials sector
2. Flat earnings per share over the last two years lagged its peers
3. Free cash flow margin dropped by 3.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Novanta’s stock price of $114.13 implies a valuation ratio of 32.3x forward P/E. Check out our free in-depth research report to learn more about why NOVT doesn’t pass our bar.

One Small-Cap Stock to Buy:

GitLab (GTLB)

Market Cap: $6.37 billion

With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.

Why Should You Buy GTLB?

1. ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Prominent and differentiated software culminates in a best-in-class gross margin of 88%
3. Robust free cash flow margin of 26.6% gives it many options for capital deployment

GitLab is trading at $37.85 per share, or 6.7x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).

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-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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