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:
Krispy Kreme (DNUT)
Market Cap: $513.9 million
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Do We Pass on DNUT?
- Earnings per share have contracted by 28.6% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Krispy Kreme’s stock price of $3.04 implies a valuation ratio of 14.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DNUT doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Urban Outfitters (URBN)
Market Cap: $6.29 billion
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Why Do We Like URBN?
- Same-store sales growth averaged 4.6% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Forecasted revenue growth of 8.3% for the next 12 months suggests stronger momentum versus most peers
- Share repurchases over the last three years enabled its annual earnings per share growth of 41.8% to outpace its revenue gains
At $70.24 per share, Urban Outfitters trades at 12.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Clover Health (CLOV)
Market Cap: $1.08 billion
Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ: CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.
Why Is CLOV on Our Radar?
- Customer trends over the past two years show it’s maintaining a steady flow of new contracts that can potentially increase in value over time
- Earnings growth has massively outpaced its peers over the last four years as its EPS has compounded at 19.1% annually
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
Clover Health is trading at $2.09 per share, or 29.1x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.
