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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one best left ignored.
One Small-Cap Stock to Sell:
ScanSource (SCSC)
Market Cap: $1.08 billion
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Is SCSC Not Exciting?
- Sales tumbled by 4.9% annually over the last two years, showing market trends are working against it during this cycle
- Estimated sales growth of 2.4% for the next 12 months is soft and implies weaker demand
- Poor free cash flow margin of 3.4% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
ScanSource’s stock price of $53.08 implies a valuation ratio of 12.3x forward P/E. Check out our free in-depth research report to learn more about why SCSC doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
The Ensign Group (ENSG)
Market Cap: $9.77 billion
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Are We Positive on ENSG?
- Annual revenue growth of 19.3% over the past two years was outstanding, reflecting market share gains this cycle
- Forecasted revenue growth of 16.4% for the next 12 months indicates its momentum over the last two years is sustainable
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 16.4% annually
At $166.07 per share, The Ensign Group trades at 21.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Tidewater (TDW)
Market Cap: $3.65 billion
Operating one of the world's largest fleets with over 200 vessels spanning 30 countries, Tidewater (NYSE: TDW) operates offshore service vessels that transport supplies, equipment, and workers to oil rigs and platforms.
Why Does TDW Stand Out?
- Annual revenue growth of 29.9% over the past five years was outstanding, reflecting market share gains this cycle
- EBITDA margin improvement of 31.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Strong free cash flow margin of 14.1% enables it to reinvest or return capital consistently
Tidewater is trading at $73.33 per share, or 15.7x forward P/E. Is now the right time to buy? See for yourself 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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
