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 best left ignored.
Two Small-Cap Stocks to Sell:
Cracker Barrel (CBRL)
Market Cap: $1.30 billion
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ: CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Why Are We Out on CBRL?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Earnings per share have dipped by 32.8% annually over the past seven years, which is concerning because stock prices follow EPS over the long term
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Cracker Barrel’s stock price of $57.65 implies a valuation ratio of 75.2x forward P/E. If you’re considering CBRL for your portfolio, see our FREE research report to learn more.
Timken (TKR)
Market Cap: $8.48 billion
Established after the founder noticed the difficulty freight wagons had making sharp turns, Timken (NYSE: TKR) is a provider of industrial parts used across various sectors.
Why Do We Pass on TKR?
- 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
- Earnings per share have contracted by 2.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Timken is trading at $122.53 per share, or 18.6x forward P/E. Check out our free in-depth research report to learn more about why TKR doesn’t pass our bar.
One Small-Cap Stock to Watch:
Workiva (WK)
Market Cap: $4.04 billion
Nicknamed "the Excel killer" by some finance professionals for its ability to eliminate spreadsheet chaos, Workiva (NYSE: WK) provides a cloud-based platform that enables organizations to streamline financial reporting, ESG, and compliance processes with connected data and automation.
Why Are We Positive on WK?
- Ability to secure long-term commitments with customers is evident in its 21.1% ARR growth over the last year
- Superior software functionality and low servicing costs lead to a premier gross margin of 80.2%
- Free cash flow generation is better than most peers and allows it to explore new investment opportunities
At $73.75 per share, Workiva trades at 3.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
