Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
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 amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
Olaplex (OLPX)
Market Cap: $1.36 billion
Rising to fame on TikTok because of its “bond building" hair products, Olaplex (NASDAQ: OLPX) offers products and treatments that repair the damage caused by traditional heat and chemical-based styling goods.
Why Is OLPX Not Exciting?
- Products aren't resonating with the market as its revenue declined by 15.6% annually over the last three years
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- 19.8 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
Olaplex’s stock price of $2.03 implies a valuation ratio of 23.1x forward P/E. Read our free research report to see why you should think twice about including OLPX in your portfolio.
Resideo (REZI)
Market Cap: $5.30 billion
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Why Does REZI Give Us Pause?
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- 21.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Eroding returns on capital suggest its historical profit centers are aging
Resideo is trading at $34.18 per share, or 11.3x forward P/E. To fully understand why you should be careful with REZI, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Halozyme Therapeutics (HALO)
Market Cap: $7.53 billion
Known for transforming hours-long intravenous infusions into minutes-long subcutaneous injections, Halozyme Therapeutics (NASDAQ: HALO) develops and licenses its proprietary ENHANZE technology that enables subcutaneous delivery of injectable drugs that would otherwise require intravenous administration.
Why Could HALO Be a Winner?
- Impressive 39.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 35.6% annually
At $64.51 per share, Halozyme Therapeutics trades at 7.9x 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
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
