Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here is one small-cap stock that could be the next big thing and two best left ignored.
Two Small-Cap Stocks to Sell:
Procore Technologies (PCOR)
Market Cap: $7.79 billion
With a mission to build software for the people that build the world, Procore Technologies (NYSE:PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device.
Why Do We Think Twice About PCOR?
- Estimated sales growth of 13.4% for the next 12 months implies demand will slow from its two-year trend
- Suboptimal cost structure is highlighted by its history of operating margin losses
Procore Technologies’s stock price of $51.28 implies a valuation ratio of 4.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PCOR.
Varonis Systems (VRNS)
Market Cap: $5.46 billion
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ:VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Are We Bearish on VRNS?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 13% underwhelmed
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 1.6 percentage points
Varonis Systems is trading at $47.70 per share, or 6.8x forward price-to-sales. To fully understand why you should be careful with VRNS, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Badger Meter (BMI)
Market Cap: $3.85 billion
The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.
Why Is BMI a Top Pick?
- Impressive 13.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 17.5% annually, topping its revenue gains
- BMI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $132.98 per share, Badger Meter trades at 26.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.