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 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:
LKQ (LKQ)
Market Cap: $7.81 billion
A global distributor of vehicle parts and accessories, LKQ (NASDAQ: LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Why Do We Avoid LKQ?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 1.2% for the next 12 months implies demand will slow from its two-year trend
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
LKQ’s stock price of $30.74 implies a valuation ratio of 9.4x forward P/E. Check out our free in-depth research report to learn more about why LKQ doesn’t pass our bar.
CNO Financial Group (CNO)
Market Cap: $3.83 billion
Rebranded from Conseco in 2010 to signal a fresh start after navigating financial challenges, CNO Financial Group (NYSE: CNO) develops and markets health insurance, annuities, and life insurance products primarily targeting middle-income pre-retirees and retirees.
Why Does CNO Fall Short?
- Net premiums earned plateaued over the last five years, signaling weak incremental demand for its insurance policies
- Costs have risen faster than its revenue over the last four years, causing its pre-tax profit margin to decline by 7.3 percentage points
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 4.9% annually over the last five years
CNO Financial Group is trading at $39.51 per share, or 1.5x forward P/B. To fully understand why you should be careful with CNO, check out our full research report (it’s free for active Edge members).
One Small-Cap Stock to Buy:
Commerce Bancshares (CBSH)
Market Cap: $7.12 billion
Founded in 1865 during the post-Civil War economic boom, Commerce Bancshares (NASDAQGS:CBSH) is a Midwest-focused bank holding company that provides retail, commercial, and wealth management services to individuals and businesses.
Why Are We Backing CBSH?
- Net interest margin expanded by 47 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Annual tangible book value per share growth of 23.9% over the past two years was outstanding, reflecting strong capital accumulation this cycle
At $53.51 per share, Commerce Bancshares trades at 1.8x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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