Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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 best left ignored.
Two Small-Cap Stocks to Sell:
First Merchants (FRME)
Market Cap: $2.62 billion
Dating back to 1893 when it first opened its doors in Indiana, First Merchants (NASDAQ: FRME) is a Midwest regional bank providing commercial, consumer, and wealth management services through branches in Indiana, Ohio, Michigan, and Illinois.
Why Does FRME Give Us Pause?
- Sales trends were unexciting over the last two years as its 6.4% annual growth was below the typical banking company
- Annual net interest income growth of 7.8% over the last five years was below our standards for the banking sector
- Performance over the past five years shows its incremental sales were less profitable, as its 1.7% annual earnings per share growth trailed its revenue gains
First Merchants is trading at $41.67 per share, or 0.9x forward P/B. If you’re considering FRME for your portfolio, see our FREE research report to learn more.
Viasat (VSAT)
Market Cap: $10.02 billion
Operating a fleet of 23 satellites that orbit the Earth and beam connectivity from space, Viasat (NASDAQ: VSAT) provides satellite-based communications networks and services for airlines, maritime vessels, governments, businesses, and residential customers worldwide.
Why Are We Bearish on VSAT?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Issuance of new shares over the last five years caused its earnings per share to fall by 8.4% annually while its revenue grew
- Cash burn makes us question whether it can achieve sustainable long-term growth
At $72.77 per share, Viasat trades at 9.6x forward EV-to-EBITDA. To fully understand why you should be careful with VSAT, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
CLEAR Secure (YOU)
Market Cap: $4.54 billion
Recognized by its signature blue lanes and biometric pods at airport checkpoints across America, CLEAR Secure (NYSE: YOU) provides biometric identity verification technology that allows subscribers to bypass regular security lines at airports and access secure experiences at various venues.
Why Is YOU a Top Pick?
- Impressive 36% annual revenue growth over the last five years indicates it’s winning market share
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Robust free cash flow margin of 50.8% gives it many options for capital deployment
CLEAR Secure’s stock price of $44.56 implies a valuation ratio of 3.8x forward price-to-sales. Is now the right time to buy? See for yourself in our full 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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
