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 amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Cogent (CCOI)
Market Cap: $1.10 billion
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Does CCOI Fall Short?
- Performance surrounding its total connections has lagged its peers
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Cogent is trading at $23.27 per share, or 3.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CCOI.
Crane NXT (CXT)
Market Cap: $2.97 billion
Born from a corporate transformation completed in 2023, Crane NXT (NYSE: CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.
Why Do We Avoid CXT?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6.3% annually
- 11.5 percentage point decline in its free cash flow margin over the last four years reflects the company’s increased investments to defend its market position
Crane NXT’s stock price of $51.77 implies a valuation ratio of 12.3x forward P/E. Read our free research report to see why you should think twice about including CXT in your portfolio.
One Small-Cap Stock to Buy:
Powell (POWL)
Market Cap: $4.08 billion
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Will POWL Beat the Market?
- Annual revenue growth of 25.7% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 86.5% outpaced its revenue gains
- Free cash flow margin jumped by 21.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $337.25 per share, Powell trades at 23.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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