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.
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 is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Optimum Communications (OPTU)
Market Cap: $803 million
Based in Long Island City, Optimum Communications (NYSE: OPTU) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Should You Sell OPTU?
- Performance surrounding its broadband subscribers has lagged its peers
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $1.77 per share, Optimum Communications trades at 7.7x forward EV-to-EBITDA. If you’re considering OPTU for your portfolio, see our FREE research report to learn more.
Mobileye (MBLY)
Market Cap: $8.26 billion
With its EyeQ chips installed in over 200 million vehicles worldwide, Mobileye (NASDAQ: MBLY) develops advanced driver assistance systems and autonomous driving technologies that help vehicles detect and respond to road conditions.
Why Do We Pass on MBLY?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.6% annually over the last two years
- Free cash flow margin shrank by 5.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Mobileye is trading at $10.15 per share, or 38.4x forward P/E. Read our free research report to see why you should think twice about including MBLY in your portfolio.
One Small-Cap Stock to Buy:
Palomar Holdings (PLMR)
Market Cap: $3.36 billion
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Will PLMR Beat the Market?
- Net premiums earned surged by 46.1% annually over the past two years, reflecting strong market share gains this cycle
- Impressive 39.5% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Book value per share outlook for the upcoming 12 months is outstanding and shows it’s on track to build significant equity value
Palomar Holdings’s stock price of $126.95 implies a valuation ratio of 3.6x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Check out the high-quality names we’ve flagged in 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
