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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, 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:

PagerDuty (PD)

Market Cap: $1.42 billion

Born from the frustration of developers being woken up by unprioritized alerts, PagerDuty (NYSE: PD) is a digital operations management platform that helps organizations detect and respond to IT incidents, outages, and other critical issues in real-time.

Why Does PD Give Us Pause?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 5.9% underwhelmed
2. Estimated sales growth of 5.8% for the next 12 months implies demand will slow from its two-year trend
3. Historical operating margin losses point to an inefficient cost structure

At $15.15 per share, PagerDuty trades at 2.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PD.

Sensata Technologies (ST)

Market Cap: $4.49 billion

Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.

Why Do We Avoid ST?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 4.8% annually over the last two years
2. High input costs result in an inferior gross margin of 30.2% that must be offset through higher volumes
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

Sensata Technologies is trading at $30.85 per share, or 8.7x forward P/E. If you’re considering ST for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Buy:

SEI Investments (SEIC)

Market Cap: $10.06 billion

Founded in 1968 as Simulated Environments Inc. to train bank loan officers using computer simulations, SEI Investments (NASDAQ: SEIC) provides technology platforms, investment management, and operational solutions for financial institutions, wealth managers, and investors.

Why Are We Backing SEIC?

1. Products and services resonate with customers, evidenced by its respectable 9% annualized sales growth over the last two years
2. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 26.9% exceeded its revenue gains over the last two years
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

SEI Investments’s stock price of $81.64 implies a valuation ratio of 15.2x forward P/E. 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

Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.

Don’t let fear keep you from great opportunities and take a look at 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-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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