3 Small-Cap Stocks with Exciting Potential

Barchart·04/03/2026 05:34:16

In today’s market, large companies dominate the landscape and grow their leads by acquiring smaller competitors - a trend that will accelerate with the Trump administration. However, some lesser-known players will continue thriving because they’ve carved durable niches for themselves.

Finding these diamonds in the rough is hard, and we started StockStory to help. That said, here are three hidden gems that could end up being the next big thing.

Karat Packaging (KRT)

Market Cap: $555.6 million

Founded as Lollicup, Karat Packaging (NASDAQ: KRT) distributes and manufactures environmentally-friendly disposable foodservice packaging solutions.

Why Could KRT Be a Winner?

1. 9.6% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
2. Free cash flow margin grew by 7.3 percentage points over the last five years, giving the company more chips to play with
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets

Karat Packaging is trading at $27.58 per share, or 14x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

LSI (LYTS)

Market Cap: $654 million

Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.

Why Is LYTS a Top Pick?

1. Impressive 16.1% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 45% outpaced its revenue gains
3. Free cash flow margin expanded by 7.2 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

LSI’s stock price of $18.50 implies a valuation ratio of 14.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Moelis (MC)

Market Cap: $4.13 billion

Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE:MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.

Why Is MC on Our Radar?

1. Market share has increased this cycle as its 33.6% annual revenue growth over the last two years was exceptional
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 311% outpaced its revenue gains
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

At $56.27 per share, Moelis trades at 16.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

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. Get Our Top 5 Growth Stocks for Free HERE.

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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

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