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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Lindblad Expeditions (LIND)
Market Cap: $1.26 billion
Founded by explorer Sven-Olof Lindblad in 1979, Lindblad Expeditions (NASDAQ: LIND) offers cruising experiences to remote destinations in partnership with National Geographic.
Why Is LIND Not Exciting?
- Lackluster 17.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Low free cash flow margin of 8.7% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Lindblad Expeditions’s stock price of $19.20 implies a valuation ratio of 76.9x forward P/E. Dive into our free research report to see why there are better opportunities than LIND.
Capital Southwest (CSWC)
Market Cap: $1.40 billion
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ: CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Why Does CSWC Worry Us?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 6.3% annually while its revenue grew
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Capital Southwest is trading at $23.24 per share, or 10.7x forward P/E. To fully understand why you should be careful with CSWC, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Old Second Bancorp (OSBC)
Market Cap: $1.08 billion
Dating back to 1871 as one of the Chicago area's longest-standing financial institutions, Old Second Bancorp (NASDAQ: OSBC) is an Illinois-based community bank offering deposit services, commercial and consumer loans, wealth management, and mortgage products through its 53 branch locations.
Why Are We Fans of OSBC?
- Impressive 21.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Annual net interest income growth of 27.4% over the last five years was superb and indicates its market share increased during this cycle
- Differentiated product suite is reflected in its Strong performance of its loan book leads to a High-yielding loan book and low cost of funds are reflected in its best-in-class net interest margin of 4.9%
At $20.96 per share, Old Second Bancorp trades at 1.1x forward P/B. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
