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.
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. Keeping that in mind, here is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
Cullen/Frost Bankers (CFR)
Market Cap: $9.52 billion
Tracing its roots back to 1868 when it was founded during Texas's post-Civil War reconstruction era, Cullen/Frost Bankers (NYSE:CFR) operates Frost Bank, a Texas-based financial institution providing commercial and consumer banking, wealth management, and insurance services.
Why Are We Hesitant About CFR?
- 7.2% annual revenue growth over the last two years was slower than its banking peers
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 10.7% annually
- Projected tangible book value per share decline of 8.2% for the next 12 months points to tough credit quality challenges ahead
Cullen/Frost Bankers is trading at $153.24 per share, or 2.1x forward P/B. Check out our free in-depth research report to learn more about why CFR doesn’t pass our bar.
BancFirst (BANF)
Market Cap: $3.63 billion
Operating as a "super community bank" with a decentralized management approach that emphasizes local responsiveness, BancFirst Corporation (NASDAQ:BANF) operates as a financial holding company providing commercial banking services to retail customers and small to medium-sized businesses primarily in Oklahoma and Texas.
Why Do We Think Twice About BANF?
- Muted 8.9% annual revenue growth over the last five years shows its demand lagged behind its banking peers
- Efficiency ratio is anticipated to remain the same over the next year, suggesting its fixed cost leverage is currently maxed out
- Estimated tangible book value per share growth of 10.2% for the next 12 months implies profitability will slow from its two-year trend
At $108.58 per share, BancFirst trades at 1.8x forward P/B. To fully understand why you should be careful with BANF, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Matador Resources (MTDR)
Market Cap: $7.10 billion
Operating primarily in the Delaware Basin where multiple oil-bearing layers lie stacked thousands of feet deep, Matador Resources (NYSE:MTDR) explores for, drills, and produces oil and natural gas from underground rock formations in New Mexico and Texas.
Why Will MTDR Outperform?
- Impressive 29.5% annual revenue growth over the last ten years indicates it’s winning market share this cycle
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 82.3%
- Strong free cash flow margin of 24.8% enables it to reinvest or return capital consistently
Matador Resources’s stock price of $57.53 implies a valuation ratio of 6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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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.