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. That said, here is one small-cap stock that could be the next big thing and two that may have trouble.

Two Small-Cap Stocks to Sell:

Alamo (ALG)

Market Cap: $2.44 billion

Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.

Why Should You Sell ALG?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Projected sales growth of 2.8% for the next 12 months suggests sluggish demand
3. Flat earnings per share over the last two years lagged its peers

Alamo’s stock price of $202.02 implies a valuation ratio of 19.7x forward P/E. To fully understand why you should be careful with ALG, check out our full research report (it’s free).

UFP Industries (UFPI)

Market Cap: $6.12 billion

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ: UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Why Are We Wary of UFPI?

1. Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share have contracted by 21.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Waning returns on capital imply its previous profit engines are losing steam

At $101.74 per share, UFP Industries trades at 14.1x forward P/E. If you’re considering UFPI for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Watch:

ESCO (ESE)

Market Cap: $4.69 billion

A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.

Why Should ESE Be on Your Watchlist?

1. Market share is on track to rise over the next 12 months as its 18.2% projected revenue growth implies demand will accelerate from its two-year trend
2. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 20.7% annually

ESCO is trading at $181.63 per share, or 29.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.