Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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. Keeping that in mind, 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:
Plexus (PLXS)
Market Cap: $6.17 billion
With over 20,000 team members across 26 global facilities, Plexus (NASDAQ: PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.
Why Are We Cautious About PLXS?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Poor free cash flow margin of 2.4% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Eroding returns on capital suggest its historical profit centers are aging
Plexus’s stock price of $231.13 implies a valuation ratio of 28.6x forward P/E. To fully understand why you should be careful with PLXS, check out our full research report (it’s free).
Bread Financial (BFH)
Market Cap: $3.46 billion
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE: BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Should You Dump BFH?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.3% annually over the last two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
At $81.10 per share, Bread Financial trades at 7.7x forward P/E. Check out our free in-depth research report to learn more about why BFH doesn’t pass our bar.
One Small-Cap Stock to Buy:
Riley Exploration Permian (REPX)
Market Cap: $868.3 million
Operating in counties where legacy oil fields have been producing since the early 1900s, Riley Exploration Permian (NYSE: REPX) drills for and produces oil and natural gas from horizontal wells in the Permian Basin of West Texas and New Mexico.
Why Are We Backing REPX?
- Annual revenue growth of 32.8% over the past eight years was outstanding, reflecting market share gains this cycle
- Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 77%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Riley Exploration Permian is trading at $40.25 per share, or 8.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
