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. That said, here is one small-cap stock that could be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
ESAB (ESAB)
Market Cap: $7.30 billion
Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE:ESAB) manufactures and sells welding and cutting equipment for numerous industries.
Why Does ESAB Give Us Pause?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Free cash flow margin dropped by 3.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
ESAB’s stock price of $120.19 implies a valuation ratio of 20.4x forward P/E. Check out our free in-depth research report to learn more about why ESAB doesn’t pass our bar.
Wintrust Financial (WTFC)
Market Cap: $9.77 billion
Founded in 1991 as a community-focused alternative to big banks in the Chicago area, Wintrust Financial (NASDAQGS:WTFC) operates community banks in the Chicago area and provides specialty finance services including insurance premium financing and wealth management.
Why Are We Wary of WTFC?
- 8.2% annual revenue growth over the last two years was slower than its banking peers
- Annual earnings per share growth of 6.1% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Low interest coverage ratio indicates the company may struggle to service its debt obligations if operational performance deteriorates
Wintrust Financial is trading at $145.91 per share, or 1.5x forward P/B. Read our free research report to see why you should think twice about including WTFC in your portfolio.
One Small-Cap Stock to Watch:
FTAI Infrastructure (FIP)
Market Cap: $573.3 million
Spun off from FTAI Aviation in 2021, FTAI Infrastructure (NASDAQ:FIP) invests in and operates infrastructure and related assets across the transportation and energy sectors.
Why Does FIP Stand Out?
- Market share has increased this cycle as its 19% annual revenue growth over the last two years was exceptional
- Exciting sales outlook for the upcoming 12 months calls for 73.5% growth, an acceleration from its two-year trend
At $4.85 per share, FTAI Infrastructure trades at 11.6x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our full 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.