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.
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 amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Tennant (TNC)
Market Cap: $1.48 billion
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Are We Out on TNC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.5% annually over the last two years
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 23.9% annually, worse than its revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $86.98 per share, Tennant trades at 15x forward P/E. Dive into our free research report to see why there are better opportunities than TNC.
Hercules Capital (HTGC)
Market Cap: $2.86 billion
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Why Is HTGC Not Exciting?
- Earnings per share fell by 3.9% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Hercules Capital’s stock price of $15.56 implies a valuation ratio of 8.1x forward P/E. If you’re considering HTGC for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
ESCO (ESE)
Market Cap: $7.84 billion
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Why Is ESE a Good Business?
- Annual revenue growth of 12.3% over the last two years was superb and indicates its market share increased during this cycle
- Additional sales over the last two years increased its profitability as the 38.4% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 10.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
ESCO is trading at $302.89 per share, or 36x forward P/E. Is now the right time to buy? 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%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. 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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
