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. Keeping that in mind, here are two small-cap stocks that could be the next big thing and one that could be down big.
One Small-Cap Stock to Sell:
PagerDuty (PD)
Market Cap: $723 million
Born from the frustration of developers being woken up by unprioritized alerts, PagerDuty (NYSE: PD) is a digital operations management platform that helps organizations detect and respond to IT incidents, outages, and other critical issues in real-time.
Why Does PD Fall Short?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.8% underwhelmed
- Estimated sales growth of 2.7% for the next 12 months implies demand will slow from its two-year trend
- Persistent operating margin losses suggest the business manages its expenses poorly
PagerDuty is trading at $7.89 per share, or 1.6x forward price-to-sales. Check out our free in-depth research report to learn more about why PD doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Inspire Medical Systems (INSP)
Market Cap: $1.91 billion
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
Why Should INSP Be on Your Watchlist?
- Impressive 55.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Earnings per share grew by 21.3% annually over the last five years, massively outpacing its peers
- Free cash flow margin increased by 26 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $65.78 per share, Inspire Medical Systems trades at 43.7x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
RLI (RLI)
Market Cap: $5.69 billion
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE: RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
Why Does RLI Catch Our Eye?
- Impressive 13.7% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Net premiums earned surged by 13.3% annually over the past five years, reflecting strong market share gains this cycle
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
RLI’s stock price of $61.82 implies a valuation ratio of 3x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.
