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. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Denny's (DENN)
Market Cap: $182.3 million
Open around the clock, Denny’s (NASDAQ:DENN) is a chain of diner restaurants serving breakfast and traditional American fare.
Why Do We Steer Clear of DENN?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- 8.7 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Denny's is trading at $3.61 per share, or 7x forward P/E. To fully understand why you should be careful with DENN, check out our full research report (it’s free).
Independent Bank (INDB)
Market Cap: $3.21 billion
Tracing its roots back to 1907 and serving as a financial cornerstone in New England for over a century, Independent Bank Corp. (NASDAQ:INDB) operates as the holding company for Rockland Trust, providing banking, investment, and financial services across Eastern Massachusetts and Rhode Island.
Why Is INDB Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.3% annually over the last two years
- 29.7 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the company’s willingness to accept lower yields to defend its market position
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
At $64.12 per share, Independent Bank trades at 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than INDB.
One Small-Cap Stock to Buy:
First BanCorp (FBP)
Market Cap: $3.29 billion
Tracing its roots back to 1948 in San Juan, First BanCorp (NYSE:FBP) is a bank holding company that provides commercial banking, consumer financing, mortgage services, and insurance products across Puerto Rico, the U.S. mainland, and the Caribbean.
Why Will FBP Outperform?
- Non-interest operating profits increased over the last four years as the company gained some leverage on its fixed costs and became more efficient
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Annual tangible book value per share growth of 22.4% over the last two years was superb and indicates its capital strength increased during this cycle
First BanCorp’s stock price of $20.53 implies a valuation ratio of 1.8x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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