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:
Paycom (PAYC)
Market Cap: $6.42 billion
Pioneering the concept of employees doing their own payroll with its "Beti" technology, Paycom (NYSE: PAYC) provides cloud-based human capital management software that helps businesses manage the entire employment lifecycle from recruitment to retirement.
Why Do We Think Twice About PAYC?
- Offerings struggled to generate meaningful interest as its average billings growth of 9% over the last year did not impress
- Estimated sales growth of 6.7% for the next 12 months implies demand will slow from its two-year trend
- Static operating margin over the last year shows it couldn’t become more efficient
Paycom is trading at $137.87 per share, or 3.3x forward price-to-sales. To fully understand why you should be careful with PAYC, check out our full research report (it’s free).
First Busey (BUSE)
Market Cap: $2.27 billion
Tracing its roots back to 1868 during America's post-Civil War reconstruction era, First Busey (NASDAQ: BUSE) is a bank holding company that provides commercial and retail banking, wealth management, and payment technology solutions across Illinois, Missouri, Florida, and Indiana.
Why Does BUSE Fall Short?
- Net interest margin of 3.4% reflects its high servicing and capital costs
- Performance over the past five years shows its incremental sales were less profitable, as its 1.9% annual earnings per share growth trailed its revenue gains
- Forecasted tangible book value per share decline of 3.1% for the upcoming 12 months implies profitability will deteriorate significantly
At $26.85 per share, First Busey trades at 1x forward P/B. Read our free research report to see why you should think twice about including BUSE in your portfolio.
One Small-Cap Stock to Buy:
Bel Fuse (BELFA)
Market Cap: $3.92 billion
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
Why Are We Bullish on BELFA?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Additional sales over the last two years increased its profitability as the 20.5% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 13.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Bel Fuse’s stock price of $247.84 implies a valuation ratio of 18.1x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
