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. 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:

IAC (IAC)

Market Cap: $2.78 billion

Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC $(IAC)$ operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.

Why Do We Think IAC Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 20.4% annually over the last two years
2. Earnings per share have dipped by 41.3% annually over the past four years, which is concerning because stock prices follow EPS over the long term
3. Push for growth has led to negative returns on capital, signaling value destruction

At $34.75 per share, IAC trades at 21.3x forward P/E. To fully understand why you should be careful with IAC, check out our full research report (it’s free).

Byline Bancorp (BY)

Market Cap: $1.18 billion

Ranking as the fifth most active Small Business Administration lender in the country, Byline Bancorp $(BY)$ is a Chicago-based bank that provides banking services to small and medium-sized businesses, commercial real estate developers, and consumers.

Why Does BY Give Us Pause?

1. Estimated net interest income growth of 4.6% for the next 12 months implies demand will slow from its five-year trend
2. Net interest margin shrank by 20.3 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the yields on its loan book are decreasing or the market is becoming more competitive
3. Anticipated 2.6 percentage point rise in its efficiency ratio suggests its expenses will increase as a percentage of revenue

Byline Bancorp’s stock price of $25.64 implies a valuation ratio of 0.9x forward P/B. Read our free research report to see why you should think twice about including BY in your portfolio.

One Small-Cap Stock to Buy:

Inter Parfums (IPAR)

Market Cap: $3.88 billion

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

Why Should You Buy IPAR?

1. Strong consumer demand for its brand drove 14.6% annual revenue growth over the last three years, outperforming sector peers
2. Free cash flow margin jumped by 8.7 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Industry-leading 27.4% return on capital demonstrates management’s skill in finding high-return investments

Inter Parfums is trading at $120.68 per share, or 22.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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

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