2 Small-Cap Stocks with Solid Fundamentals and 1 We Ignore

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.

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. That said, here are two small-cap stocks that could be the next 100 baggers and one that could be down big.

One Small-Cap Stock to Sell:

Cognex (CGNX)

Market Cap: $8.81 billion

Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ:CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.

Why Are We Wary of CGNX?

1. Sales trends were unexciting over the last five years as its 4.2% annual growth was below the typical business services company
2. Earnings per share fell by 1.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Cognex’s stock price of $54.28 implies a valuation ratio of 42.7x forward P/E.

Two Small-Cap Stocks to Watch:

Verra Mobility (VRRM)

Market Cap: $2.50 billion

Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.

Why Could VRRM Be a Winner?

1. Annual revenue growth of 20% over the last five years was superb and indicates its market share increased during this cycle
2. Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 61.3%
3. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 19.6% annually

At $16.54 per share, Verra Mobility trades at 12.2x forward P/E. Is now a good time to buy?

WisdomTree (WT)

Market Cap: $2.40 billion

Originally founded as a financial media company before pivoting to ETF management in 2006, WisdomTree (NYSE:WT) is a financial services company that creates and manages exchange-traded funds (ETFs) and other investment products for individual and institutional investors.

Why Is WT a Top Pick?

1. Impressive 18.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Share repurchases over the last two years enabled its annual earnings per share growth of 52.5% to outpace its revenue gains
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

WisdomTree is trading at $17.54 per share, or 15.5x forward P/E. Is now the right time to buy?

High-Quality Stocks for All Market Conditions

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it's flagging for this month — FREE.

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).