1 Small-Cap Stock with Exciting Potential and 2 We Avoid

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. That said, 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:

Collegium Pharmaceutical (COLL)

Market Cap: $1.43 billion

Pioneering abuse-deterrent technology in a field plagued by addiction concerns, Collegium Pharmaceutical (NASDAQ:COLL) develops and markets specialty medications for treating moderate to severe pain, including abuse-deterrent opioid formulations.

Why Does COLL Fall Short?

1. Modest revenue base of $757.1 million gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Waning returns on capital imply its previous profit engines are losing steam

At $44.69 per share, Collegium Pharmaceutical trades at 5.8x forward P/E. Read our free research report to see why you should think twice about including COLL in your portfolio.

Bank of Hawaii (BOH)

Market Cap: $2.59 billion

Founded in 1897 as a financial anchor for the newly annexed Hawaiian territory, Bank of Hawaii (NYSE:BOH) is a financial institution providing banking, investment, and insurance services primarily to customers in Hawaii, Guam, and other Pacific Islands.

Why Is BOH Risky?

1. Net interest income was flat over the last five years, indicating it’s failed to expand this cycle
2. Net interest margin of 2.3% is well below other banks, signaling its loans aren’t very profitable
3. Flat earnings per share over the last five years underperformed the sector average

Bank of Hawaii’s stock price of $65.10 implies a valuation ratio of 1.7x forward P/B. Check out our free in-depth research report to learn more about why BOH doesn’t pass our bar.

One Small-Cap Stock to Watch:

Hims & Hers Health (HIMS)

Market Cap: $7.90 billion

Originally launched with a focus on stigmatized conditions like hair loss and sexual health, Hims & Hers Health (NYSE:HIMS) operates a consumer-focused telehealth platform that connects patients with healthcare providers for prescriptions and wellness products.

Why Do We Watch HIMS?

1. Customer trends over the past two years show it’s maintaining a steady flow of new contracts that can potentially increase in value over time
2. Free cash flow margin jumped by 21.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Improving returns on capital suggest its past investments are beginning to deliver value

Hims & Hers Health is trading at $34.97 per share, or 27.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

Stocks We Like Even More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 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-small-cap company Exlservice (+354% 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.