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 is one small-cap stock that could be the next big thing and two best left ignored.
Two Small-Cap Stocks to Sell:
Magnachip (MX)
Market Cap: $86.64 million
With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE:MX) is a provider of analog and mixed-signal semiconductors.
Why Do We Avoid MX?
- Annual sales declines of 17.2% for the past five years show its products and services struggled to connect with the market during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 16.5%
- Long-term business health is up for debate as its cash burn has increased over the last five years
Magnachip is trading at $2.41 per share, or 0.5x forward price-to-sales. Check out our free in-depth research report to learn more about why MX doesn’t pass our bar.
Bread Financial (BFH)
Market Cap: $2.92 billion
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE:BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Are We Out on BFH?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.1% annually over the last two years
- Earnings per share have contracted by 3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
At $63.96 per share, Bread Financial trades at 7.2x forward P/E. If you’re considering BFH for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
German American Bancorp (GABC)
Market Cap: $1.48 billion
Founded in 1910 during a wave of community banking expansion in the Midwest, German American Bancorp (NASDAQ:GABC) is a financial holding company that provides banking, wealth management, and insurance services across southern Indiana and Kentucky.
Why Do We Love GABC?
- Annual net interest income growth of 11.8% over the past five years was outstanding, reflecting market share gains this cycle
- Net interest margin grew by 35 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
- Balance sheet strength has increased this cycle as its 26.1% annual tangible book value per share growth over the last two years was exceptional
German American Bancorp’s stock price of $39.41 implies a valuation ratio of 1.3x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.