Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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. That said, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two small-cap stocks to sell:
Parsons (PSN)
Market cap: $5.21 billion
Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Why Do We Avoid PSN?
- Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 1.8% for the past two years was weak
- Earnings per share lagged its peers over the last two years as they only grew by 1.7% annually
- Underwhelming 7.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $49.33 per share, Parsons trades at 15x forward P/E. To fully understand why you should be careful with PSN, check out our full research report (it’s free).
Golar LNG (GLNG)
Market cap: $4.77 billion
Pioneering a way to monetize stranded gas reserves that would otherwise be uneconomical to develop, Golar LNG (NASDAQ: GLNG) converts ships into floating liquefied natural gas facilities that liquefy natural gas at offshore sites.
Why Do We Think Twice About GLNG?
- 2.8% annual revenue growth over the last five years was slower than its energy upstream and integrated energy peers
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Golar LNG is trading at $47.01 per share, or 138.1x forward P/E. Read our free research report to see why you should think twice about including GLNG in your portfolio.
One small-cap stock to buy:
HCI Group (HCI)
Market cap: $2.47 billion
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE: HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
Why Will HCI Beat the Market?
- Net premiums earned surged by 15.5% annually over the past two years, reflecting strong market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 36.3% annually, topping its revenue gains
- Annual book value per share growth of 42.4% over the last two years was superb and indicates its capital strength increased during this cycle
HCI Group’s stock price of $198.36 implies a valuation ratio of 2x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
