Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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. That said, here is one small-cap stock that could be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Lamb Weston (LW)
Market Cap: $7.47 billion
Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Are We Wary of LW?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Sales are projected to remain flat over the next 12 months as demand decelerates from its three-year trend
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 35.7% annually while its revenue grew
At $53.01 per share, Lamb Weston trades at 16x forward P/E. Read our free research report to see why you should think twice about including LW in your portfolio.
Customers Bancorp (CUBI)
Market Cap: $2.51 billion
Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE:CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.
Why Is CUBI Not Exciting?
- Annual net interest income growth of 9.5% over the last five years was below our standards for the banking sector
- Inferior net interest margin of 3.2% means it must compensate for lower profitability through increased loan originations
- Performance over the past five years shows its incremental sales were less profitable, as its 4.2% annual earnings per share growth trailed its revenue gains
Customers Bancorp is trading at $73.49 per share, or 1.1x forward P/B. If you’re considering CUBI for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
Hamilton Lane (HLNE)
Market Cap: $3.58 billion
With over $100 billion in assets under management and supervision, Hamilton Lane (NASDAQ:HLNE) is an investment management firm that specializes in private markets, offering advisory services and fund solutions to institutional and private wealth investors.
Why Is HLNE a Top Pick?
- Impressive 19.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Incremental sales over the last two years boosted profitability as its annual earnings per share growth of 20.5% outstripped its revenue performance
Hamilton Lane’s stock price of $81.76 implies a valuation ratio of 11.9x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.