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.
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 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
Zillow (ZG)
Market Cap: $8.53 billion
Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.
Why Is ZG Risky?
- Annual revenue declines of 4.7% over the last five years indicate problems with its market positioning
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 10.6% annually
- Poor free cash flow margin of 12.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Zillow’s stock price of $38.29 implies a valuation ratio of 15.3x forward P/E. Read our free research report to see why you should think twice about including ZG in your portfolio.
Banc of California (BANC)
Market Cap: $2.87 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Do We Avoid BANC?
- 2.5% annual net interest income growth over the last five years was slower than its banking peers
- Operational productivity has decreased over the last five years as its efficiency ratio worsened by 17.2 percentage points
- Tangible book value per share tumbled by 3.1% annually over the last five years, showing banking sector trends are working against its favor during this cycle
At $18.65 per share, Banc of California trades at 0.9x forward P/B. Check out our free in-depth research report to learn more about why BANC doesn’t pass our bar.
One Small-Cap Stock to Watch:
Kirby (KEX)
Market Cap: $7.85 billion
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Does KEX Stand Out?
- Market share has increased this cycle as its 11.1% annual revenue growth over the last five years was exceptional
- Share repurchases over the last two years enabled its annual earnings per share growth of 24% to outpace its revenue gains
- Free cash flow margin grew by 8.9 percentage points over the last five years, giving the company more chips to play with
Kirby is trading at $146.65 per share, or 20.2x forward P/E. 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 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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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.
