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 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Universal Display (OLED)
Market Cap: $4.16 billion
Serving major consumer electronics manufacturers, Universal Display (NASDAQ:OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.
Why Does OLED Worry Us?
- Annual sales declines of 1.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Anticipated sales growth of 8.2% for the next year implies demand will be shaky
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 1.1% annually
At $90.51 per share, Universal Display trades at 20.2x forward P/E. If you’re considering OLED for your portfolio, see our FREE research report to learn more.
Arbor Realty Trust (ABR)
Market Cap: $1 billion
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE:ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Why Are We Out on ABR?
- Net interest income was flat over the last five years, indicating it’s failed to expand this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 18.4% annually, worse than its revenue declines
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 6.2% annually over the last two years
Arbor Realty Trust’s stock price of $5.37 implies a valuation ratio of 0.5x forward P/B. Read our free research report to see why you should think twice about including ABR in your portfolio.
One Small-Cap Stock to Watch:
Grid Dynamics (GDYN)
Market Cap: $621.4 million
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ:GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Do We Like GDYN?
- Annual revenue growth of 15.2% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has comfortably beaten the peer group average over the last two years as its EPS has compounded at 14% annually
- Historical investments are beginning to pay off as its returns on capital are growing
Grid Dynamics is trading at $7.71 per share, or 15.6x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.