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 big thing and two that could be down big.
Two small-cap stocks to sell:
MSC Industrial (MSM)
Market cap: $6.63 billion
Founded in NYC’s Little Italy, MSC Industrial Direct (NYSE: MSM) provides industrial supplies and equipment, offering vast and reliable selection for customers such as contractors
Why Should You Sell MSM?
- Sales trends were unexciting over the last two years as its 2.4% annual growth was below the typical industrials company
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Waning returns on capital imply its previous profit engines are losing steam
MSC Industrial’s stock price of $118.99 implies a valuation ratio of 20.3x forward P/E. Dive into our free research report to see why there are better opportunities than MSM.
German American Bancorp (GABC)
Market cap: $1.92 billion
Founded in 1910 during a wave of community banking expansion in the Midwest, German American Bancorp (NASDAQ: GABC) is a financial holding company that provides banking, wealth management, and insurance services across southern Indiana and Kentucky.
Why Does GABC Worry Us?
- Efficiency ratio is projected to stay flat over the coming year, suggesting its fixed cost leverage is currently maxed out
- Annual earnings per share growth of 4.9% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Annual tangible book value per share growth of 1.9% over the last five years was below our standards for the banking sector
German American Bancorp is trading at $51.12 per share, or 1.5x forward P/B. If you’re considering GABC for your portfolio, see our FREE research report to learn more.
One small-cap stock to buy:
Sezzle (SEZL)
Market cap: $4.29 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.
What Makes SEZL Stand Out?
- Annual revenue growth of 66.1% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 22.7% annually
- ROE punches in at 16.4%, illustrating management’s expertise in identifying profitable investments
At $128.52 per share, Sezzle trades at 21.9x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-quality stocks for all market conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth 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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
