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.
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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two best left ignored.
Two Small-Cap Stocks to Sell:
CTS (CTS)
Market Cap: $1.94 billion
With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE: CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.
Why Does CTS Fall Short?
- 2.3% annual revenue growth over the last two years was slower than its business services peers
- Revenue base of $554.8 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Diminishing returns on capital suggest its earlier profit pools are drying up
CTS is trading at $66.82 per share, or 27.3x forward P/E. Dive into our free research report to see why there are better opportunities than CTS.
SolarEdge (SEDG)
Market Cap: $3.55 billion
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Why Is SEDG Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.3% annually over the last five years
- Cash-burning history makes us doubt the long-term viability of its business model
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $55.63 per share, SolarEdge trades at 96x forward P/E. If you’re considering SEDG for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
EPAM (EPAM)
Market Cap: $4.85 billion
Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.
Why Are We Fans of EPAM?
- Market share has increased this cycle as its 14.8% annual revenue growth over the last five years was exceptional
- Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 12.2% annually
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
EPAM’s stock price of $89.02 implies a valuation ratio of 7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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.
