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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Power Integrations (POWI)
Market Cap: $4.33 billion
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ: POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Why Should You Sell POWI?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last five years
- Operating margin declined by 25 percentage points over the last five years as its sales cratered
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 10.7% annually, worse than its revenue
Power Integrations is trading at $87.99 per share, or 59.2x forward P/E. If you’re considering POWI for your portfolio, see our FREE research report to learn more.
Hertz (HTZ)
Market Cap: $1.59 billion
Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Are We Out on HTZ?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.8% annually over the last two years
- Waning returns on capital imply its previous profit engines are losing steam
Hertz’s stock price of $5.08 implies a valuation ratio of 0.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than HTZ.
One Small-Cap Stock to Buy:
Houlihan Lokey (HLI)
Market Cap: $9.37 billion
Founded in 1972 and known for its expertise in complex financial situations, Houlihan Lokey (NYSE: HLI) is a global investment bank specializing in mergers and acquisitions, capital markets, financial restructurings, and valuation advisory services.
Why Should You Buy HLI?
- Annual revenue growth of 16.9% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 29.7% outpaced its revenue gains
- Annual tangible book value per share growth of 20.1% over the last two years was superb and indicates its capital strength increased during this cycle
At $140.77 per share, Houlihan Lokey trades at 17.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
