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. Keeping that in mind, here are two small-cap stocks that could be the next big thing and one that could be down big.
One Small-Cap Stock to Sell:
El Pollo Loco (LOCO)
Market Cap: $462.6 million
With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.
Why Do We Pass on LOCO?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Modest revenue base of $500.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Estimated sales growth of 2.3% for the next 12 months is soft and implies weaker demand
El Pollo Loco is trading at $15.21 per share, or 15.3x forward P/E. Read our free research report to see why you should think twice about including LOCO in your portfolio.
Two Small-Cap Stocks to Watch:
Paymentus (PAY)
Market Cap: $4.48 billion
Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE:PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.
Why Will PAY Beat the Market?
- Annual revenue growth of 39.5% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 47.8% annual growth in its earnings per share outpaced its revenue
Paymentus’s stock price of $35.66 implies a valuation ratio of 40.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Core Natural Resources (CNR)
Market Cap: $5.05 billion
Tracing its origins to 1864 and operating some mines southwest of Pittsburgh, Core Natural Resources (NYSE:CNR) mines and exports metallurgical coal used in steelmaking and thermal coal for power generation.
Why Could CNR Be a Winner?
- Annual revenue growth of 15.6% over the past ten years was outstanding, reflecting market share gains this cycle
- $4.27 billion in revenue gives it scale, which leads to bargaining power with suppliers and retailers
- Robust free cash flow margin of 12.6% gives it many options for capital deployment
At $98.02 per share, Core Natural Resources trades at 22.6x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.