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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that could be down big.

Two Small-Cap Stocks to Sell:

Q2 Holdings (QTWO)

Market Cap: $4.65 billion

Founded in 2004 by Hank Seale, Q2 (NYSE: QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.

Why Does QTWO Fall Short?

1. 11.7% annual revenue growth over the last three years was slower than its software peers
2. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 50.9%, one of the worst among software companies
3. Poor expense management has led to operating losses

At $71.91 per share, Q2 Holdings trades at 6.4x forward price-to-sales. If you’re considering QTWO for your portfolio, see our FREE research report to learn more.

Nordson (NDSN)

Market Cap: $10.66 billion

Founded in 1954, Nordson Corporation (NASDAQ: NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

Why Are We Hesitant About NDSN?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Earnings per share have dipped by 1.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Free cash flow margin dropped by 5.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Nordson is trading at $179.10 per share, or 18.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why NDSN doesn’t pass our bar.

One Small-Cap Stock to Buy:

Nova (NVMI)

Market Cap: $5.61 billion

Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.

Why Are We Bullish on NVMI?

1. Impressive 24.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Free cash flow margin jumped by 12.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

Nova’s stock price of $176.10 implies a valuation ratio of 25.1x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.