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 best left ignored.
Two Small-Cap Stocks to Sell:
OFG Bancorp (OFG)
Market Cap: $2.23 billion
Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE: OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.
Why Are We Wary of OFG?
- Muted 9.2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Demand will likely fall over the next 12 months as Wall Street expects flat net interest income
- Net interest margin shrank by 33.4 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
OFG Bancorp’s stock price of $52.71 implies a valuation ratio of 1.5x forward P/B. Read our free research report to see why you should think twice about including OFG in your portfolio.
Autoliv (ALV)
Market Cap: $8.87 billion
With products estimated to save over 30,000 lives annually in traffic accidents worldwide, Autoliv (NYSE: ALV) develops and manufactures passive safety systems for vehicles, including airbags, seatbelts, and steering wheels that protect occupants during crashes.
Why Does ALV Give Us Pause?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.4% over the last two years was below our standards for the industrials sector
- Projected sales growth of 4.8% for the next 12 months suggests sluggish demand
- Gross margin of 17.8% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $121.17 per share, Autoliv trades at 11.2x forward P/E. Check out our free in-depth research report to learn more about why ALV doesn’t pass our bar.
One Small-Cap Stock to Buy:
Sezzle (SEZL)
Market Cap: $4.09 billion
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Will SEZL Outperform?
- Impressive 66.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings per share grew by 22.7% annually over the last two years and trumped its peers
- Industry-leading 16.4% return on equity demonstrates management’s skill in finding high-return investments
Sezzle is trading at $122.60 per share, or 19.1x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
