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.
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. That said, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Vestis (VSTS)
Market Cap: $1.76 billion
Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE: VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.
Why Is VSTS Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.8% annually over the last two years
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Earnings per share have contracted by 19.7% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
At $14.79 per share, Vestis trades at 27.8x forward P/E. If you’re considering VSTS for your portfolio, see our FREE research report to learn more.
MGIC Investment (MTG)
Market Cap: $5.39 billion
Founded in 1957 when the modern mortgage insurance industry was in its infancy, MGIC Investment (NYSE: MTG) provides private mortgage insurance that protects lenders when homebuyers default on their loans, enabling borrowers to purchase homes with smaller down payments.
Why Is MTG Not Exciting?
- 1.2% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
- Sales are projected to tank by 1.3% over the next 12 months as demand evaporates
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.4% annually
MGIC Investment’s stock price of $28.16 implies a valuation ratio of 1.1x forward P/B. To fully understand why you should be careful with MTG, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
TaskUs (TASK)
Market Cap: $510.1 million
Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ: TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.
Why Do We Like TASK?
- Annual revenue growth of 18.1% over the past five years was outstanding, reflecting market share gains this cycle
- Free cash flow margin increased by 19.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Improving returns on capital suggest its past investments are beginning to deliver value
TaskUs is trading at $4.79 per share, or 3.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
