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.
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 that could be down big.
Two Small-Cap Stocks to Sell:
GoodRx (GDRX)
Market Cap: $965.2 million
Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ: GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.
Why Should You Sell GDRX?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Revenue base of $787.9 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Push for growth has led to negative returns on capital, signaling value destruction
GoodRx is trading at $2.86 per share, or 8.6x forward P/E. Check out our free in-depth research report to learn more about why GDRX doesn’t pass our bar.
Flagstar Financial (FLG)
Market Cap: $5.88 billion
Tracing its roots back to 1859 and rebranded from New York Community Bancorp in 2024, Flagstar Financial (NYSE: FLG) is a bank holding company that offers commercial and consumer banking services, with specialties in multi-family lending, mortgage originations, and warehouse lending.
Why Do We Think FLG Will Underperform?
- Annual net interest income growth of 8.4% over the last five years was below our standards for the banking sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 15.3% annually while its revenue grew
- Tangible book value per share tumbled by 6.9% annually over the last five years, showing banking sector trends are working against it during this cycle
Flagstar Financial’s stock price of $14.09 implies a valuation ratio of 0.7x forward P/B. Read our free research report to see why you should think twice about including FLG in your portfolio.
One Small-Cap Stock to Watch:
Genpact (G)
Market Cap: $5.57 billion
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE: G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Why Could G Be a Winner?
- Share repurchases have increased shareholder returns as its annual earnings per share growth of 11.8% exceeded its revenue gains over the last five years
- Robust free cash flow margin of 11.2% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
At $32.91 per share, Genpact trades at 7.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
