Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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:
Addus HomeCare (ADUS)
Market Cap: $2.06 billion
Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ: ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.
Why Are We Wary of ADUS?
- Subscale operations are evident in its revenue base of $1.35 billion, meaning it has fewer distribution channels than its larger rivals
At $113.08 per share, Addus HomeCare trades at 16.8x forward P/E. To fully understand why you should be careful with ADUS, check out our full research report (it’s free for active Edge members).
First Busey (BUSE)
Market Cap: $2.03 billion
Tracing its roots back to 1868 during America's post-Civil War reconstruction era, First Busey (NASDAQ: BUSE) is a bank holding company that provides commercial and retail banking, wealth management, and payment technology solutions across Illinois, Missouri, Florida, and Indiana.
Why Does BUSE Fall Short?
- Net interest margin of 3.2% is well below other banks, signaling its loans aren’t very profitable
- Costs have risen faster than its revenue over the last five years, causing its efficiency ratio to worsen by 2.9 percentage points
- Estimated tangible book value per share decline of 4.1% for the next 12 months implies a challenging profitability environment
First Busey is trading at $22.99 per share, or 0.9x forward P/B. Read our free research report to see why you should think twice about including BUSE in your portfolio.
One Small-Cap Stock to Watch:
Federated Hermes (FHI)
Market Cap: $3.66 billion
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Are We Positive On FHI?
- Share buybacks catapulted its annual earnings per share growth to 22.7%, which outperformed its revenue gains over the last two years
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Federated Hermes’s stock price of $49.46 implies a valuation ratio of 10x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% 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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