1 Small-Cap Stock on Our Watchlist and 2 We Turn Down

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.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here is one small-cap stock that could be the next big thing and two that could be down big.

Two Small-Cap Stocks to Sell:

Zumiez (ZUMZ)

Market Cap: $282.4 million

With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.

Why Do We Think ZUMZ Will Underperform?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Historical operating margin losses point to an inefficient cost structure
3. Earnings per share have contracted by 57.7% annually over the last six years, a headwind for returns as stock prices often echo long-term EPS performance

Zumiez’s stock price of $15.90 implies a valuation ratio of 60.5x forward P/E. Dive into our free research report to see why there are better opportunities than ZUMZ.

Vestis (VSTS)

Market Cap: $644.7 million

Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE:VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.

Why Do We Pass on VSTS?

1. Sales tumbled by 1.5% annually over the last two years, showing market trends are working against its favor during this cycle
2. 9.8 percentage point decline in its free cash flow margin over the last four years reflects the company’s increased investments to defend its market position
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Vestis is trading at $4.89 per share, or 14.1x forward P/E. Check out our free in-depth research report to learn more about why VSTS doesn’t pass our bar.

One Small-Cap Stock to Watch:

City Holding (CHCO)

Market Cap: $1.79 billion

With roots dating back to 1957 and a strategic presence along the I-64 and I-81 corridors, City Holding (NASDAQGS:CHCO) operates as a financial holding company providing banking, trust, and investment services through its subsidiary City National Bank across West Virginia, Kentucky, Virginia, and Ohio.

Why Should CHCO Be on Your Watchlist?

1. Differentiated product suite results in a Strong performance of its loan book leads to a High-yielding loan book and low cost of funds are reflected in its premier net interest margin of 3.9%
2. Share buybacks catapulted its annual earnings per share growth to 11.6%, which outperformed its revenue gains over the last five years
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

At $123.32 per share, City Holding trades at 2.3x forward P/B. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.