2 Small-Cap Stocks on Our Watchlist and 1 to Brush Off

Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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 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:

Nu Skin (NUS)

Market Cap: $272.7 million

With person-to-person marketing and sales rather than selling through retail stores, Nu Skin (NYSE:NUS) is a personal care and dietary supplements company that engages in direct selling.

Why Is NUS Not Exciting?

1. Annual revenue declines of 13.7% over the last three years indicate problems with its market positioning
2. Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
3. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable

At $5.63 per share, Nu Skin trades at 5.2x forward price-to-earnings. If you’re considering NUS for your portfolio, see our FREE research report to learn more.

Two Small-Cap Stocks to Watch:

Nextracker (NXT)

Market Cap: $5.77 billion

With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dabhi solar farm project, Nextracker (NASDAQ:NXT) is a provider of solar tracker systems that help solar panels follow the sun.

Why Are We Bullish on NXT?

1. Sales pipeline is in good shape as its backlog averaged 56.1% growth over the past two years
2. Free cash flow margin jumped by 13.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Returns on capital are growing as management capitalizes on its market opportunities

Nextracker’s stock price of $39.94 implies a valuation ratio of 12.3x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Alignment Healthcare (ALHC)

Market Cap: $3.51 billion

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ:ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

Why Are We Positive On ALHC?

1. Average customer growth of 36.9% over the past two years demonstrates success in acquiring new clients that could increase their spending in the future
2. Notable projected revenue growth of 38.6% for the next 12 months hints at market share gains
3. Adjusted operating margin improvement of 2.1 percentage points over the last two years demonstrates its ability to scale efficiently

Alignment Healthcare is trading at $18.15 per share, or 83.3x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.