1 Small-Cap Stock to Consider Right Now and 2 Facing Headwinds

October 09, 2025 at 09:18 AM EDT

HRB 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 big thing and two that may have trouble.

Two Small-Cap Stocks to Sell:

H&R Block (HRB)

Market Cap: $6.45 billion

Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE: HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.

Why Are We Hesitant About HRB?

Lackluster 4.1% annual revenue growth over the last two years indicates the company is losing ground to competitors
Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.3%
Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

H&R Block is trading at $50.25 per share, or 10x forward P/E. Read our free research report to see why you should think twice about including HRB in your portfolio.

United Bankshares (UBSI)

Market Cap: $5.26 billion

With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.

Why Does UBSI Give Us Pause?

Annual revenue growth of 1.7% over the last two years was below our standards for the banking sector
7.3% annual tangible book value per share growth over the last two years was slower than its banking peers

At $37.25 per share, United Bankshares trades at 1x forward P/B. Check out our free in-depth research report to learn more about why UBSI doesn’t pass our bar.

One Small-Cap Stock to Watch:

Graham Corporation (GHM)

Market Cap: $618.3 million

Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.

Why Is GHM Interesting?

Demand is greater than supply as the company’s 21.7% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
Incremental sales over the last two years have been highly profitable as its earnings per share increased by 145% annually, topping its revenue gains

Graham Corporation’s stock price of $56.33 implies a valuation ratio of 41.1x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out 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 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-small-cap company Comfort Systems (+782% 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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