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.
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. Keeping that in mind, 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:
Universal Logistics (ULH)
Market Cap: $485.4 million
Founded in 1932, Universal Logistics (NASDAQ:ULH) is a provider of customized transportation and logistics solutions operating throughout the United States and in Mexico, Canada, and Colombia.
Why Do We Think ULH Will Underperform?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Diminishing returns on capital suggest its earlier profit pools are drying up
Universal Logistics is trading at $18.44 per share, or 18.9x forward P/E. Check out our free in-depth research report to learn more about why ULH doesn’t pass our bar.
National Bank Holdings (NBHC)
Market Cap: $1.82 billion
Operating under familiar local brands like Community Banks of Colorado, Bank Midwest, and Bank of Jackson Hole, National Bank Holdings (NYSE:NBHC) operates regional banks across Colorado, Kansas, Missouri, Wyoming, Texas, and other western states, offering commercial, business, and consumer banking services.
Why Does NBHC Give Us Pause?
- Muted 6.1% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 2.5% annually while its revenue grew
- 1.8% annual tangible book value per share growth over the last five years was slower than its banking peers
National Bank Holdings’s stock price of $40.86 implies a valuation ratio of 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than NBHC.
One Small-Cap Stock to Watch:
Freshworks (FRSH)
Market Cap: $3.51 billion
Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ:FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.
Why Does FRSH Stand Out?
- Annual revenue growth of 24% over the last five years beat the sector average and indicates its software solves complex business issues
- Software is difficult to replicate at scale and results in a stellar gross margin of 85%
- FRSH is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $13.36 per share, Freshworks trades at 3.7x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.