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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Flowers Foods (FLO)
Market Cap: $2.75 billion
With Wonder Bread as its premier brand, Flower Foods (NYSE: FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.
Why Do We Think Twice About FLO?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Poor expense management has led to an operating margin of 5.6% that is below the industry average
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
Flowers Foods’s stock price of $13.01 implies a valuation ratio of 11.9x forward P/E. Check out our free in-depth research report to learn more about why FLO doesn’t pass our bar.
Navient (NAVI)
Market Cap: $1.31 billion
Spun off from Sallie Mae in 2014 to handle the company's loan servicing and collection operations, Navient (NASDAQ: NAVI) provides education loan servicing and business processing solutions that help manage federal student loans, private education loans, and government services.
Why Do We Steer Clear of NAVI?
- Sales tumbled by 13% annually over the last five years, showing market trends are working against its favor during this cycle
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 36.8% annually, worse than its revenue
- Elevated debt-to-equity ratio of 18.5× suggests the firm is overleveraged and may struggle to secure additional financing
Navient is trading at $13.16 per share, or 10.8x forward P/E. If you’re considering NAVI for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
Inspire Medical Systems (INSP)
Market Cap: $2.19 billion
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
Why Is INSP a Top Pick?
- Steady expansion of new domestic medical centers reflects a push to reach more customers in underpenetrated markets
- Earnings per share have massively outperformed its peers over the last five years, increasing by 22.5% annually
- Free cash flow margin expanded by 31.8 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $74.09 per share, Inspire Medical Systems trades at 25x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. 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-micro-cap company Kadant (+351% 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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