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 are two small-cap stocks that could be the next 100 baggers and one that may have trouble.
One Small-Cap Stock to Sell:
Sunrun (RUN)
Market Cap: $2.08 billion
Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ:RUN) provides residential solar electricity, specializing in panel installation and leasing services.
Why Does RUN Worry Us?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- 17× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Sunrun’s stock price of $8.64 implies a valuation ratio of 8.3x forward P/E. To fully understand why you should be careful with RUN, check out our full research report (it’s free).
Two Small-Cap Stocks to Watch:
Vita Coco (COCO)
Market Cap: $3.02 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ:COCO) offers coconut water products that are a natural way to quench thirst.
Why Will COCO Outperform?
- Products are flying off the shelves as its unit sales averaged 15.2% growth over the past two years
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 42.9% over the last three years outstripped its revenue performance
- Free cash flow margin grew by 12.9 percentage points over the last year, giving the company more chips to play with
Vita Coco is trading at $51.21 per share, or 25.1x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Avnet (AVT)
Market Cap: $7.63 billion
With a century-long history of adapting to technological evolution, Avnet (NASDAQ:AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Why Are We Fans of AVT?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 7.8% annual sales growth over the last two years
- Dominant market position is represented by its $27.63 billion in revenue and gives it fixed cost leverage when sales grow
- Share repurchases over the last five years enabled its annual earnings per share growth of 15.9% to outpace its revenue gains
At $93.69 per share, Avnet trades at 8.7x forward P/E. Is now the time to initiate a position? Find out 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.