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. 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:
Fortune Brands (FBIN)
Market cap: $5.27 billion
Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE: FBIN) makes plumbing, security, and outdoor living products.
Why Do We Avoid FBIN?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its operating margin
- Earnings per share have dipped by 6.5% annually over the past five years, which is concerning because stock prices follow EPS over the long term
Fortune Brands’s stock price of $43.62 implies a valuation ratio of 14.2x forward P/E. If you’re considering FBIN for your portfolio, see our FREE research report to learn more.
Murphy Oil (MUR)
Market cap: $6.14 billion
Operating in waters over a mile deep in the Gulf of Mexico and extracting hydrocarbons from tight shale rock formations in Texas, Murphy Oil (NYSE: MUR) explores for and produces crude oil, natural gas, and natural gas liquids from fields in North America and Asia.
Why Are We Hesitant About MUR?
- Efficiency has decreased over the last five years as its EBITDA margin fell by 5.1 percentage points
At $42.89 per share, Murphy Oil trades at 9.8x forward P/E. To fully understand why you should be careful with MUR, check out our full research report (it’s free).
One small-cap stock to buy:
SM Energy (SM)
Market cap: $9.41 billion
Operating across three key regions with over 328,000 net acres under its control, SM Energy (NYSE: SM) explores for, develops, and produces oil, natural gas, and natural gas liquids primarily from shale formations in Texas and Utah.
Why Will SM Outperform?
- Impressive 16.7% annual revenue growth over the last ten years indicates it’s winning market share this cycle
- Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 86.8%
- Robust free cash flow margin of 19.4% gives it many options for capital deployment
SM Energy is trading at $39.68 per share, or 4.6x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks we like even more
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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.
