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.
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 may have trouble.
Two Small-Cap Stocks to Sell:
Inspired (INSE)
Market Cap: $199.2 million
Specializing in digital casino gaming, Inspired (NASDAQ: INSE) is a provider of gaming hardware, virtual sports platforms, and server-based gaming systems.
Why Does INSE Give Us Pause?
- Annual revenue growth of 1.9% over the last two years was below our standards for the consumer discretionary sector
- Anticipated sales growth of 2.3% for the next year implies demand will be shaky
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.5% for the last two years
Inspired is trading at $7.40 per share, or 2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including INSE in your portfolio.
Home Bancshares (HOMB)
Market Cap: $5.45 billion
Founded in Conway, Arkansas in 1998 and growing through strategic acquisitions across the Southeast, Home Bancshares (NYSE: HOMB) operates as the bank holding company for Centennial Bank, providing commercial and retail banking services to businesses and individuals across multiple states.
Why Are We Cautious About HOMB?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Estimated net interest income growth of 1.4% for the next 12 months implies demand will slow from its four-year trend
- Anticipated efficiency ratio improvement of 1.6 percentage points over the next year signals it will gain leverage on its fixed costs and become more productive
Home Bancshares’s stock price of $27.58 implies a valuation ratio of 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than HOMB.
One Small-Cap Stock to Watch:
Braze (BRZE)
Market Cap: $3.03 billion
Founded in 2011 after the co-founders met at NYC Disrupt Hackathon, Braze (NASDAQ: BRZE) is a customer engagement software platform that allows brands to connect with customers through data-driven and contextual marketing campaigns.
Why Could BRZE Be a Winner?
- Ability to secure long-term commitments with customers is evident in its 23.1% ARR growth over the last year
- Estimated revenue growth of 18.4% for the next 12 months implies its momentum over the last three years will continue
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
At $27.59 per share, Braze trades at 3.9x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
