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.
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 are two small-cap stocks that could be the next big thing and one best left ignored.
One Small-Cap Stock to Sell:
Steven Madden (SHOO)
Market Cap: $3.10 billion
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
Why Should You Sell SHOO?
- Sales trends were unexciting over the last five years as its 13.4% annual growth was below the typical consumer discretionary company
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3 percentage points
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $42.36 per share, Steven Madden trades at 18x forward P/E. To fully understand why you should be careful with SHOO, check out our full research report (it’s free).
Two Small-Cap Stocks to Watch:
Redwire (RDW)
Market Cap: $2.61 billion
Based in Jacksonville, Florida, Redwire (NYSE:RDW) is a provider of systems and components used in space infrastructure.
Why Are We Fans of RDW?
- Annual revenue growth of 20.8% over the last two years was superb and indicates its market share increased during this cycle
- Notable projected revenue growth of 20.1% for the next 12 months hints at market share gains
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Redwire’s stock price of $10.50 implies a valuation ratio of 4.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Axos Financial (AX)
Market Cap: $5.32 billion
Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE:AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.
Why Will AX Outperform?
- Annual net interest income growth of 18.3% over the past five years was outstanding, reflecting market share gains this cycle
- Differentiated product suite results in a best-in-class net interest margin of 4.8%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 18.8% exceeded its revenue gains over the last five years
Axos Financial is trading at $93.78 per share, or 1.4x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.