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.
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 that could be down big.
Two Small-Cap Stocks to Sell:
Marriott Vacations (VAC)
Market Cap: $3.44 billion
Spun off from Marriott International in 1984, Marriott Vacations (NYSE:VAC) is a vacation company providing leisure experiences for travelers around the world.
Why Are We Bearish on VAC?
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- High net-debt-to-EBITDA ratio of 10× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Marriott Vacations is trading at $98.63 per share, or 10.4x forward P/E. Check out our free in-depth research report to learn more about why VAC doesn’t pass our bar.
Nabors Industries (NBR)
Market Cap: $1.42 billion
Operating one of the largest land-based drilling rig fleets in the world with over 285 rigs across more than 15 countries, Nabors Industries (NYSE:NBR) operates drilling rigs and provides related services to help oil and gas companies drill wells on land and offshore platforms.
Why Does NBR Fall Short?
- Costly operations and weak unit economics result in an inferior gross margin of 39.1% that must be offset through higher production volumes
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.9% for the last five years
At $95.65 per share, Nabors Industries trades at 52.5x forward P/E. To fully understand why you should be careful with NBR, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
DXP (DXPE)
Market Cap: $2.80 billion
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ:DXPE) provides pumps, valves, and other industrial components.
Why Are We Bullish on DXPE?
- Annual revenue growth of 16.8% over the past five years was outstanding, reflecting market share gains this cycle
- Share buybacks catapulted its annual earnings per share growth to 22.5%, which outperformed its revenue gains over the last two years
- Free cash flow margin grew by 4 percentage points over the last five years, giving the company more chips to play with
DXP’s stock price of $180.05 implies a valuation ratio of 25.5x forward P/E. Is now the right time to buy? Find out 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.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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.