Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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 are two small-cap stocks that could be the next 100 baggers and one best left ignored.
One Small-Cap Stock to Sell:
Paylocity (PCTY)
Market Cap: $5.68 billion
Operating in a field where companies traditionally juggled multiple disconnected systems, Paylocity (NASDAQ: PCTY) provides cloud-based human capital management and payroll software solutions that help businesses manage their workforce and HR processes.
Why Do We Think Twice About PCTY?
- ARR growth averaged a weak 13.4% over the last year, suggesting that competition is pulling some attention away from its software
- Estimated sales growth of 7% for the next 12 months implies demand will slow from its two-year trend
- Operating margin improvement of 1.4 percentage points over the last year demonstrates its ability to scale efficiently
Paylocity’s stock price of $105.30 implies a valuation ratio of 3.4x forward price-to-sales. Check out our free in-depth research report to learn more about why PCTY doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Northwest Pipe (NWPX)
Market Cap: $732.6 million
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.
Why Could NWPX Be a Winner?
- Market share has increased this cycle as its 13% annual revenue growth over the last five years was exceptional
- Share repurchases over the last two years enabled its annual earnings per share growth of 31.4% to outpace its revenue gains
- Free cash flow margin grew by 14.7 percentage points over the last five years, giving the company more chips to play with
Northwest Pipe is trading at $76.56 per share, or 18.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Champion Homes (SKY)
Market Cap: $4.01 billion
Founded in 1951, Champion Homes (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.
Why Do We Like SKY?
- Annual revenue growth of 15.4% over the past two years was outstanding, reflecting market share gains this cycle
- Share buybacks catapulted its annual earnings per share growth to 29.4%, which outperformed its revenue gains over the last five years
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
At $70.98 per share, Champion Homes trades at 20.7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
