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. 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:
FTAI Infrastructure (FIP)
Market Cap: $479.8 million
Spun off from FTAI Aviation in 2021, FTAI Infrastructure (NASDAQ:FIP) invests in and operates infrastructure and related assets across the transportation and energy sectors.
Why Are We Cautious About FIP?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Cash-burning history makes us doubt the long-term viability of its business model
FTAI Infrastructure is trading at $4.06 per share, or 9.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including FIP in your portfolio.
Pelagos Insurance (PLGO)
Market Cap: $1.93 billion
Founded in Bermuda in 2014 and designed to adapt nimbly to evolving market conditions, Pelagos Insurance (NYSE:PLGO) is a global specialty insurance and reinsurance company focused on creating value through strategic capital allocation, expert risk selection and a network of long-term underwriting partnerships.
Why Does PLGO Fall Short?
- Sluggish 7.1% annualized growth in net premiums earned over the last two years indicates the firm trailed its insurance peers
- Performance over the past two years shows its incremental sales were less profitable, as its 6.2% annual earnings per share growth trailed its revenue gains
- Muted 10.9% annual book value per share growth over the last two years shows its capital generation lagged behind its insurance peers
Pelagos Insurance’s stock price of $23.33 implies a valuation ratio of 0.8x forward P/B. To fully understand why you should be careful with PLGO, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Urban Outfitters (URBN)
Market Cap: $6.37 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?
- Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
- Same-store sales growth averaged 4.8% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 42.4% exceeded its revenue gains over the last three years
At $74.49 per share, Urban Outfitters trades at 11.8x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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.