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 may have trouble.
Two Small-Cap Stocks to Sell:
Conagra (CAG)
Market Cap: $7.98 billion
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Do We Think CAG Will Underperform?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Operating margin declined by 26.2 percentage points over the last year as its sales cratered
Conagra is trading at $16.61 per share, or 11.4x forward P/E. Dive into our free research report to see why there are better opportunities than CAG.
Sonos (SONO)
Market Cap: $1.82 billion
A pioneer in connected home audio systems, Sonos (NASDAQ:SONO) offers a range of premium wireless speakers and sound systems.
Why Do We Avoid SONO?
- Annual revenue declines of 2.6% over the last five years indicate problems with its market positioning
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 11.5% annually, worse than its revenue
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.3% for the last two years
At $15.45 per share, Sonos trades at 17.4x forward P/E. Check out our free in-depth research report to learn more about why SONO doesn’t pass our bar.
One Small-Cap Stock to Watch:
Boot Barn (BOOT)
Market Cap: $4.9 billion
With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.
Why Are We Fans of BOOT?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 6.7% over the past two years
- Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 14.5%
Boot Barn’s stock price of $163.79 implies a valuation ratio of 18.5x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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 Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.