1 Small-Cap Stock Worth Investigating and 2 We Turn Down
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.
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 amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
OPENLANE (OPLN)
Market Cap: $4.36 billion
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE:OPLN) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Are We Wary of OPLN?
- 2.1% annual revenue growth over the last five years was slower than its business services peers
- Low returns on capital reflect management’s struggle to allocate funds effectively
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
OPENLANE is trading at $35.50 per share, or 22.5x forward P/E. If you’re considering OPLN for your portfolio, see our FREE research report to learn more.
Banc of California (BANC)
Market Cap: $2.92 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE:BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Do We Think BANC Will Underperform?
- Muted 2.5% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Expenses have increased as a percentage of revenue over the last five years as its efficiency ratio degraded by 15.9 percentage points
- Earnings per share fell by 24.3% annually over the last five years while its revenue was flat, showing each sale was less profitable
At $18.50 per share, Banc of California trades at 1x forward P/B. Check out our free in-depth research report to learn more about why BANC doesn’t pass our bar.
One Small-Cap Stock to Watch:
The Bancorp (TBBK)
Market Cap: $2.05 billion
Operating behind the scenes of many popular fintech apps and prepaid cards you might use daily, The Bancorp (NASDAQ:TBBK) is a bank holding company that specializes in providing banking services to fintech companies and offering specialty lending products.
Why Are We Fans of TBBK?
- Annual revenue growth of 18% over the last two years was superb and indicates its market share increased during this cycle
- Efficiency ratio improvement of -6.1 percentage points is projected for next year as the firm achieves greater operating leverage
- Share repurchases over the last five years enabled its annual earnings per share growth of 25% to outpace its revenue gains
The Bancorp’s stock price of $50.25 implies a valuation ratio of 2.7x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.