Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

1 Small-Cap Stock Worth Your Attention and 2 to Approach with Caution

FSS Cover Image

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.

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. 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:

Kadant (KAI)

Market Cap: $3.73 billion

Headquartered in Massachusetts, Kadant (NYSE: KAI) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.

Why Are We Hesitant About KAI?

  1. Sales trends were unexciting over the last two years as its 7.2% annual growth was below the typical industrials company
  2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
  3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.4% annually

At $316.39 per share, Kadant trades at 31.2x forward P/E. Read our free research report to see why you should think twice about including KAI in your portfolio.

Quest Resource (QRHC)

Market Cap: $48.08 million

Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.

Why Are We Out on QRHC?

  1. Sales stagnated over the last two years and signal the need for new growth strategies
  2. Free cash flow margin dropped by 9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
  3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Quest Resource’s stock price of $2.33 implies a valuation ratio of 6.7x forward P/E. Check out our free in-depth research report to learn more about why QRHC doesn’t pass our bar.

One Small-Cap Stock to Buy:

Federal Signal (FSS)

Market Cap: $5.78 billion

Developing sirens that warned of air raid attacks or fallout during the Cold War, Federal Signal (NYSE: FSS) provides safety and emergency equipment for government agencies, municipalities, and industrial companies.

Why Do We Love FSS?

  1. Average backlog growth of 10.8% over the past two years shows it has a steady sales pipeline that will drive future orders
  2. Operating margin expanded by 4.1 percentage points over the last five years as it scaled and became more efficient
  3. Earnings per share grew by 28.7% annually over the last two years, massively outpacing its peers

Federal Signal is trading at $95.29 per share, or 24.8x forward P/E. Is now the time to initiate a position? 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 Growth Stocks for this month. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.

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