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 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
PubMatic (PUBM)
Market Cap: $764.5 million
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Do We Steer Clear of PUBM?
- Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 96% net revenue retention rate
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 11.5 percentage points
At $16.63 per share, PubMatic trades at 2.5x forward price-to-sales. Check out our free in-depth research report to learn more about why PUBM doesn’t pass our bar.
Glacier Bancorp (GBCI)
Market Cap: $6.24 billion
Operating through seventeen distinct bank divisions with local brands and management teams, Glacier Bancorp (NYSE:GBCI) is a bank holding company that provides various banking services to individuals and businesses across eight western states.
Why Are We Wary of GBCI?
- 8.5% annual revenue growth over the last five years was slower than its banking peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 4.8% annually while its revenue grew
- Capital trends were unexciting over the last five years as its 3.1% annual tangible book value per share growth was below the typical banking firm
Glacier Bancorp’s stock price of $47.96 implies a valuation ratio of 1.4x forward P/B. Read our free research report to see why you should think twice about including GBCI in your portfolio.
One Small-Cap Stock to Buy:
IMAX (IMAX)
Market Cap: $2.95 billion
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE:IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Should You Buy IMAX?
- Market share has increased this cycle as its 17.9% annual revenue growth over the last five years was exceptional
- Free cash flow margin increased by 24.8 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Rising returns on capital show the company is starting to reap the benefits of its past investments
IMAX is trading at $53.75 per share, or 26.6x forward P/E. Is now a good time to buy? Find out in our full 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.