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 100 bagger and two that may have trouble.

Two Small-Cap Stocks to Sell:

Ruger (RGR)

Market Cap: $750.2 million

Founded in 1949, Ruger (NYSE: RGR) is an American manufacturer of firearms for the commercial sporting market.

Why Do We Avoid RGR?

1. Products and services aren't resonating with the market as its revenue declined by 3.9% annually over the last two years
2. Earnings per share fell by 14.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Ruger’s stock price of $46.42 implies a valuation ratio of 24.4x forward P/E. If you’re considering RGR for your portfolio, see our FREE research report to learn more.

Taboola (TBLA)

Market Cap: $942.9 million

Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.

Why Does TBLA Worry Us?

1. Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 2% annually
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2,406.2 percentage points
3. Push for growth has led to negative returns on capital, signaling value destruction

Taboola is trading at $3.20 per share, or 7.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TBLA doesn’t pass our bar.

One Small-Cap Stock to Buy:

HCI Group (HCI)

Market Cap: $2.42 billion

Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE: HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.

Why Will HCI Outperform?

1. Net premiums earned surged by 26.7% annually over the past two years, reflecting strong market share gains this cycle
2. Balance sheet strength has increased this cycle as its 63.4% annual book value per share growth over the last two years was exceptional
3. Notable projected book value per share growth of 23% for the next 12 months hints at strong capital generation

At $186.75 per share, HCI Group trades at 2.9x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. 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 Kadant (+351% 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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