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. 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:

Applied Industrial (AIT)

Market Cap: $9.84 billion

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE: AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Why Is AIT Not Exciting?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.1%
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6% annually

At $260.90 per share, Applied Industrial trades at 23.8x forward P/E. Read our free research report to see why you should think twice about including AIT in your portfolio.

Tri Pointe Homes (TPH)

Market Cap: $2.96 billion

Established in 2009 in California, Tri Pointe Homes (NYSE: TPH) is a United States homebuilder recognized for its innovative and sustainable approach to creating premium, life-enhancing homes.

Why Should You Sell TPH?

1. Backlog has dropped by 11.2% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Projected sales decline of 17.8% over the next 12 months indicates demand will continue deteriorating
3. Sales were less profitable over the last two years as its earnings per share fell by 7.5% annually, worse than its revenue declines

Tri Pointe Homes’s stock price of $34.39 implies a valuation ratio of 14.8x forward P/E. To fully understand why you should be careful with TPH, check out our full research report (it’s free for active Edge members).

One Small-Cap Stock to Watch:

Commvault (CVLT)

Market Cap: $5.47 billion

Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.

Why Do We Like CVLT?

1. Winning new contracts that can potentially increase in value as its billings growth has averaged 25.4% over the last year
2. Software is difficult to replicate at scale and leads to a stellar gross margin of 81.5%
3. Software platform has product-market fit given the rapid recovery of its customer acquisition costs

Commvault is trading at $123.95 per share, or 4.5x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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