2 Small-Cap Stocks on Our Watchlist and 1 We Brush Off
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. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.
One Small-Cap Stock to Sell:
Zumiez (ZUMZ)
Market Cap: $312.3 million
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Do We Pass on ZUMZ?
- Reduction in its number of stores signals a focus on profitability through targeted consolidation
- Modest revenue base of $938.1 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
Zumiez is trading at $17.46 per share, or 17.1x forward P/E. Check out our free in-depth research report to learn more about why ZUMZ doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Primerica (PRI)
Market Cap: $8.70 billion
With a sales force of over 140,000 licensed representatives operating on an independent contractor model, Primerica (NYSE:PRI) provides term life insurance, investment products, and other financial services to middle-income households in the United States and Canada.
Why Does PRI Catch Our Eye?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9% annual sales growth over the last two years
- Pre-tax profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
Primerica’s stock price of $281.32 implies a valuation ratio of 3.3x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Coastal Financial (CCB)
Market Cap: $1.10 billion
Pioneering the intersection of traditional banking and financial technology in the Pacific Northwest, Coastal Financial (NASDAQ:CCB) operates as a bank holding company that provides traditional banking services and Banking-as-a-Service (BaaS) solutions to consumers and businesses.
Why Will CCB Outperform?
- Market share has increased this cycle as its 38% annual net interest income growth over the last five years was exceptional
- Strong performance of its loan book is reflected in its best-in-class net interest margin of 7.2%
- Balance sheet strength has increased this cycle as its 20.3% annual tangible book value per share growth over the last two years was exceptional
At $70.27 per share, Coastal Financial trades at 2x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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.
