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

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 be the next 100 bagger and two that may have trouble.

Two Small-Cap Stocks to Sell:

Pangaea (PANL)

Market Cap: $447 million

Established in 1996, Pangaea Logistics (NASDAQ:PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.

Why Are We Wary of PANL?

1. High input costs result in an inferior gross margin of 19.1% that must be offset through higher volumes
2. Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
3. Low free cash flow margin of 0.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Pangaea is trading at $6.88 per share, or 6.6x forward P/E. Read our free research report to see why you should think twice about including PANL in your portfolio.

ScanSource (SCSC)

Market Cap: $857.1 million

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Is SCSC Risky?

1. Annual sales declines of 11.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share lagged its peers over the last two years as they only grew by 3.8% annually
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

At $39.11 per share, ScanSource trades at 9.2x forward P/E. If you’re considering SCSC for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Watch:

Inter Parfums (IPAR)

Market Cap: $2.72 billion

With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ:IPAR) manufactures and distributes fragrances worldwide.

Why Could IPAR Be a Winner?

1. Brand and reputation resonate with consumers, as seen in its above-market 14.1% annual sales growth over the last three years
2. Products command premium prices and lead to a stellar gross margin of 56%
3. ROIC punches in at 28.5%, illustrating management’s expertise in identifying profitable investments

Inter Parfums’s stock price of $84.92 implies a valuation ratio of 17.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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The names generating the next wave of massive growth are right here 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).

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