1 Small-Cap Stock with Exciting Potential and 2 Facing Headwinds

1 Small-Cap Stock with Exciting Potential and 2 Facing Headwinds

Petr Huřťák

Mon, February 16, 2026 at 1:32 PM GMT+9 4 min read

In this article:

SYBT

+1.75%

FAF

+1.63%

AAON

-0.56%

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.

The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that could be down big.

Two Small-Cap Stocks to Sell:

AAON (AAON)

Market Cap: $8.24 billion

Backed by two million square feet of lab testing space, AAON (NASDAQ:AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.

Why Does AAON Give Us Pause?

Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 6 percentage points

Earnings per share fell by 22.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable

Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 27.2 percentage points

At $101.05 per share, AAON trades at 52.2x forward P/E. If you’re considering AAON for your portfolio, see our FREE research report to learn more.

First American Financial (FAF)

Market Cap: $6.85 billion

Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial (NYSE:FAF) provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.

Why Do We Pass on FAF?

Annual revenue growth of 1% over the last five years was below our standards for the insurance sector

Net premiums earned plateaued over the last five years, signaling weak incremental demand for its insurance policies

Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 1.8% annually

First American Financial is trading at $67.17 per share, or 1.2x forward P/B. To fully understand why you should be careful with FAF, check out our full research report (it’s free).

One Small-Cap Stock to Watch:

Stock Yards Bank (SYBT)

Market Cap: $2.06 billion

Founded in 1904 in Louisville and named after the city’s historic livestock market district, Stock Yards Bancorp (NASDAQ:SYBT) operates a regional bank providing commercial banking, wealth management, and trust services across Kentucky, Indiana, and Ohio.

Story continues  

Why Is SYBT on Our Radar?

Impressive 17.1% annual net interest income growth over the last five years indicates it’s winning market share this cycle

Projected net interest income growth of 11.9% for the next 12 months suggests its momentum from the last five years will persist

Annual tangible book value per share growth of 18.5% over the past two years was outstanding, reflecting strong capital accumulation this cycle

Stock Yards Bank’s stock price of $69.73 implies a valuation ratio of 1.9x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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).

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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

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