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 is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Cognex (CGNX)
Market Cap: $6.61 billion
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ:CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Should You Dump CGNX?
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 12.9 percentage points
- Free cash flow margin shrank by 10.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $39.40 per share, Cognex trades at 36.5x forward P/E. To fully understand why you should be careful with CGNX, check out our full research report (it’s free).
First Financial Bankshares (FFIN)
Market Cap: $4.48 billion
With roots dating back to 1890 and a network spanning over 70 locations across the Lone Star State, First Financial Bankshares (NASDAQ:FFIN) is a Texas-focused regional bank providing commercial banking, trust services, and wealth management across numerous communities throughout the state.
Why Are We Hesitant About FFIN?
- Muted 5.8% annual revenue growth over the last five years shows its demand lagged behind its banking peers
- Muted 7.7% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.3% annually
First Financial Bankshares’s stock price of $31.54 implies a valuation ratio of 2.4x forward P/B. Dive into our free research report to see why there are better opportunities than FFIN.
One Small-Cap Stock to Watch:
Sezzle (SEZL)
Market Cap: $2.61 billion
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ:SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Do We Watch SEZL?
- Annual revenue growth of 67.8% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 173% annually, topping its revenue gains
Sezzle is trading at $76.42 per share, or 18.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Check out the high-quality names we’ve flagged 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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.