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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. 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:
Brookdale (BKD)
Market Cap: $3.09 billion
With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.
Why Are We Wary of BKD?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Sales are projected to tank by 4.3% over the next 12 months as demand evaporates
- 11× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Brookdale’s stock price of $15.82 implies a valuation ratio of 17.3x forward EV-to-EBITDA. If you’re considering BKD for your portfolio, see our FREE research report to learn more.
Insperity (NSP)
Market Cap: $1.44 billion
Pioneering the professional employer organization (PEO) industry it helped establish, Insperity (NYSE: NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.
Why Do We Pass on NSP?
- Sales trends were unexciting over the last two years as its 2.5% annual growth was below the typical business services company
- Earnings per share fell by 30.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin dropped by 4.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $44.09 per share, Insperity trades at 18.9x forward P/E. Dive into our free research report to see why there are better opportunities than NSP.
One Small-Cap Stock to Watch:
Butterfield Bank (NTB)
Market Cap: $2.29 billion
Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE: NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.
Why Are We Fans of NTB?
- Annual tangible book value per share growth of 9.3% over the past five years was outstanding, reflecting strong capital accumulation this cycle
- Capital strength is on track to rise over the next 12 months as its 23.5% projected tangible book value per share growth implies profitability will accelerate from its two-year trend
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Butterfield Bank is trading at $60.27 per share, or 1.8x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free.
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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.
