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.
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:
Flowserve (FLS)
Market Cap: $8.97 billion
Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE: FLS) manufactures and sells flow control equipment for various industries.
Why Do We Think Twice About FLS?
- Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 5.1% for the past two years was weak
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 7.3%
- Low free cash flow margin of 4.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Flowserve is trading at $70.15 per share, or 17x forward P/E. If you’re considering FLS for your portfolio, see our FREE research report to learn more.
Two Small-Cap Stocks to Buy:
AAR (AIR)
Market Cap: $4.39 billion
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Will AIR Beat the Market?
- Market share has increased this cycle as its 18.9% annual revenue growth over the last two years was exceptional
- Market share will likely rise over the next 12 months as its expected revenue growth of 13.5% is robust
- Earnings per share grew by 19.5% annually over the last two years and trumped its peers
AAR’s stock price of $110.00 implies a valuation ratio of 20.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Federated Hermes (FHI)
Market Cap: $3.99 billion
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Will FHI Outperform?
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROE punches in at 25.7%, illustrating management’s expertise in identifying profitable investments
At $55.53 per share, Federated Hermes trades at 10.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
