2 Small-Cap Stocks with Promising Prospects and 1 That Underwhelm

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.

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 are two small-cap stocks that could be the next big thing and one that could be down big.

One Small-Cap Stock to Sell:

New Mountain Finance (NMFC)

Market Cap: $1.03 billion

Operating as a financial bridge for growing businesses that might be overlooked by traditional banks, New Mountain Finance (NASDAQ:NMFC) is a business development company that provides loans and debt financing to middle-market companies in defensive growth industries.

Why Is NMFC Not Exciting?

1. Sales trends were unexciting over the last two years as its 2.3% annual growth was below the typical financials company
2. Earnings per share fell by 11% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable

New Mountain Finance is trading at $9.74 per share, or 3.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than NMFC.

Two Small-Cap Stocks to Watch:

City Holding (CHCO)

Market Cap: $1.72 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 Does CHCO Catch Our Eye?

1. Differentiated product suite leads to a Strong performance of its loan book is reflected in its High-yielding loan book and low cost of funds lead to a stellar net interest margin of 3.9%
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Balance sheet strength has increased this cycle as its 21.4% annual tangible book value per share growth over the last two years was exceptional

City Holding’s stock price of $118.84 implies a valuation ratio of 2.1x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

Cadence Bank (CADE)

Market Cap: $6.96 billion

With roots dating back to 1885 and a strategic focus on middle-market commercial lending, Cadence Bancorporation (NYSE:CADE) is a bank holding company that provides commercial banking, retail banking, and wealth management services to middle-market businesses and individuals.

Why Should You Buy CADE?

1. Impressive 17.8% annual net interest income growth over the last five years indicates it’s winning market share this cycle
2. Net interest margin grew by 34 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
3. Earnings per share grew by 5.3% annually over the last two years and trumped its peers

At $37.38 per share, Cadence Bank trades at 1.2x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

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

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