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. That said, here is one small-cap stock that could be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
CNO Financial Group (CNO)
Market Cap: $5.14 billion
Rebranded from Conseco in 2010 to signal a fresh start after navigating financial challenges, CNO Financial Group (NYSE: CNO) develops and markets health insurance, annuities, and life insurance products primarily targeting middle-income pre-retirees and retirees.
Why Are We Out on CNO?
- Growth in insurance policies was lackluster over the last five years as its 1.2% annual growth underperformed the typical financial institution
- Day-to-day expenses have swelled relative to revenue over the last five years as its pre-tax profit margin fell by 7.7 percentage points
- Annual book value per share declines of 7.5% for the past five years show its capital management struggled during this cycle
CNO Financial Group’s stock price of $55.46 implies a valuation ratio of 1.9x forward P/B. Dive into our free research report to see why there are better opportunities than CNO.
World Kinect (WKC)
Market Cap: $1.90 billion
Serving over 150,000 customers from commercial jets to cargo ships to heating oil consumers, World Kinect (NYSE: WKC) procures and delivers fuel and energy products to airlines, shipping companies, trucking fleets, and industrial businesses worldwide.
Why Should You Sell WKC?
- Costly operations and weak unit economics result in an inferior gross margin of 2.3% that must be offset through higher production volumes
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
World Kinect is trading at $37.24 per share, or 13.9x forward P/E. Check out our free in-depth research report to learn more about why WKC doesn’t pass our bar.
One Small-Cap Stock to Watch:
Herbalife (HLF)
Market Cap: $1.21 billion
With the first products sold out of the trunk of the founder’s car, Herbalife (NYSE: HLF) today offers a portfolio of shakes, supplements, personal care products, and weight management programs to help customers reach their nutritional and fitness goals.
Why Do We Like HLF?
- Differentiated product offerings are difficult to replicate at scale and result in a best-in-class gross margin of 90.1%
- Free cash flow margin increased by 2.7 percentage points over the last year, giving the company more capital to invest or return to shareholders
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
At $11.61 per share, Herbalife trades at 4.5x 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
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.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
