Explore the five best small-cap stocks you should consider in 2025. Discover how LevelFields can help you find better investment options faster.
Stock Earnings Results
July 9, 2025
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Some of the market’s most remarkable success stories began as small, overlooked companies operating quietly in the background. While the spotlight often shines on large-cap giants, it’s the smaller players poised for breakout growth that can offer investors outsized returns.
These companies aren’t just riding trends. They’re shaping them by driving innovation, disrupting industries, and scaling fast when conditions align.
If you are looking for under-the-radar stocks that demonstrate strong fundamentals, momentum, and vision, we'll cover five of the best small-cap stocks you should consider here.
Small-cap stocks are shares of companies whose market capitalization generally falls between $300 million and $2 billion.
These companies are considered smaller in size compared to mid-cap (roughly $2B–$10B) and large-cap firms (over $10B), yet they often punch above their weight in growth potential.
Sectors like technology, biotechnology, energy, and financial services often feature dynamic small-caps poised for rapid development, especially when market dynamics shift in favor of risk-on sentiment.
While small-cap investing involves greater volatility, careful research can uncover companies with strong fundamentals, innovative business models, or favorable market positioning.
Here are five top options to watch.
Sector: Quantum Technology/Computing
Market cap: ~$2 billion
Quantum Computing Inc. develops advanced quantum software and systems for solving complex optimization problems across defense, logistics, finance, and healthcare.
While still in early stages, the company aims to make quantum-powered analytics accessible on classical computing infrastructure, which is a niche strategy that could carve out a leadership role in hybrid quantum-classical environments.
Historically, QUBT has benefited from a surge in interest in quantum computing technologies, especially during 2021 when quantum themes briefly captured speculative investor attention.
The stock has remained volatile but saw renewed momentum after:
With increasing institutional interest in quantum-readiness and national pushes for post-quantum cybersecurity, QUBT is poised to benefit from long-term digital infrastructure transformation, despite its current small-cap volatility.
Sector: Medical Devices/AI Healthcare
Market cap: ~$570 million
Butterfly Network has reimagined ultrasound imaging through the Butterfly iQ+, a pocket-sized, AI-enabled handheld ultrasound device.
It replaces traditional ultrasound machines with portable tech that connects to a smartphone and supports remote diagnostics. The firm is on a mission to make high-quality imaging globally accessible.
Initially, BFLY attracted significant attention after going public via SPAC in 2021, with backing from Bill Gates and Dr. Jonathan Rothberg, a noted biotech innovator.
Though it struggled with post-SPAC volatility and supply chain disruptions, Butterfly has recently regained ground:
For long-term investors, BFLY stands at the intersection of AI, healthcare equity, and scalable diagnostics, making it a strategic small-cap opportunity with real-world utility.
Sector: Technology Services/Packaged Software
Market cap: ~$800 million
Red Cat Holdings operates at the intersection of defense, autonomous flight, and AI-enabled surveillance. Through subsidiaries like Teal Drones, it develops unmanned aerial systems (UAS) for military and public safety applications.
The company emphasizes secure, ruggedized drones approved for U.S. government use, a space receiving growing federal attention.
Red Cat’s momentum is rooted in the ongoing shift toward drone-based intelligence and tactical surveillance, especially in U.S. defense spending. Key developments driving interest include:
While RCAT has experienced share price volatility, its presence in mission-critical, high-security government contracts provides a durable niche.
Also, as industries become increasingly reliant on autonomous security tech, Red Cat is poised to benefit from rising geopolitical tensions and drone adoption across public sector operations.
Sector: Financial Services/Fintech
Market cap: ~1.3 billion
Coastal Financial Corp is a holding company for Coastal Community Bank, based in Washington state.
While it operates traditional banking services, what sets CCB apart from most regional banks is its growing banking-as-a-service (BaaS) segment, which provides white-labeled digital banking infrastructure to fintech startups and payment companies.
CCB’s performance has benefited from both stable banking fundamentals and strong growth in its fintech servicing segment:
For investors seeking small-caps with exposure to fintech growth but anchored by traditional banking fundamentals, CCB offers an underrated, steady-growth play.
Sector: E-commerce/Business Services
Market cap: ~$700 million
Liquidity Services operates online marketplaces that help businesses, government agencies, and nonprofits manage surplus assets. It enables sellers to dispose of excess inventory, equipment, and returned goods through digital auctions across sectors like retail, defense, energy, and heavy industry.
Liquidity Services has demonstrated steady growth driven by operational scale, unique data advantages, and broader digital transformation trends:
For investors looking for a small-cap with a unique moat, asset-light model, and Environmental, Social, and Governance or ESG-aligned upside, Liquidity Services offers a compelling case amid changing market dynamics.
While large-cap stocks often overshadow them, small-caps tend to offer compelling upside potential, especially for investors with longer time horizons and higher risk tolerance.
Here's why they deserve to be considered by investors.
Smaller companies are often in earlier growth phases. This means investors can get in before the broader market catches on.
When successful, these businesses can expand rapidly and deliver significantly higher returns compared to more mature, larger ones.
Since major financial institutions cover small-caps less, they often fly under the radar. That gives retail investors an edge to uncover value before it becomes widely known.
During early bull markets or economic rebounds, small-cap stocks typically outperform their mid-cap and large-cap counterparts (such as blue-chip stocks).
Their agility, focus on innovation, and room for expansion position them well to benefit from changing market dynamics.
While small-cap stocks offer the potential for higher returns, they also come with a distinct set of risks that investors should weigh carefully.
These companies, after all, differ significantly from their mid-cap and large-cap counterparts in terms of structure, visibility, and volatility.
Here are some of the most common risks to be mindful of:
Compared to large-cap stocks, which represent well-established businesses with predictable earnings, small-cap companies often have shorter operating histories and less access to capital. Their business models may still be evolving, which makes them more vulnerable during challenging economic periods.
As a result, small-caps tend to experience greater price swings and are more sensitive to shifts in market sentiment.
Smaller companies generally have lower trading volumes and thinner analyst coverage. This can lead to wider bid-ask spreads and difficulty executing large trades without impacting price.
It also means investors have to conduct more of their own research, as institutional-grade investment advice may be scarce.
Small-caps are subject to higher failure rates than large companies. Without a long track record, these businesses may struggle with scaling, securing financing, or managing operational risks.
A single misstep in execution or a change in regulatory policy can have outsized effects on their equity value.
Unlike broad-based funds or larger asset classes, small-cap stocks often reflect concentrated exposure to specific industries or technologies.
For example, a biotech company might surge or collapse based on clinical trial outcomes. This level of volatility can quickly shift the figure of your portfolio's performance in a short period.
Due to limited public information and fewer institutional investors, small-cap securities are more prone to market overreactions.
A strong earnings report or product announcement might lead to sharp gains, but setbacks, even minor ones, can also lead to aggressive sell-offs.
Chief investment officers and portfolio managers typically advise that small-cap investing demands more hands-on analysis.
These positions can lead or lag based on microeconomic changes, company-specific developments, or broader financial market trends.
Investing in small-caps requires a different approach than investing in large companies. While the rewards can be greater, so too are the risks.
Make sure to:
Small-cap companies often lack broad analyst coverage, so it’s up to you to dig into their fundamentals.
Analyze revenue growth, operating margins, market potential, and leadership quality. Understanding how the business fits within its sector and broader market is critical.
It also helps to diversify your portfolio.
Because small-cap stocks can be more volatile, spread your investments across sectors and industries. Don’t overcommit to a single company or trend.
Smaller companies can be more sensitive to economic pressure and funding limitations.
Check balance sheets for healthy cash reserves and manageable debt. Also, watch trading volume to avoid getting stuck in illiquid positions.
Small-caps can rise or fall quickly.
Define your price targets and risk tolerance. Know when you’ll take profits or cut losses to stay disciplined.
News like earnings releases, management changes, and new contracts can have outsized effects on small-cap stock prices.
These events often serve as early signals for momentum or trouble.
Investing in small-cap stocks takes timing, strategy, and awareness.
That’s where LevelFields comes in.
This AI-powered stock analysis platform monitors 6,300 companies 24/7, helping you find opportunities before the rest of the market.
With LevelFields, you can:
Whether you’re managing your portfolio actively or looking to build a position in overlooked companies, LevelFields enhances your edge.
Trade the signal, not the noise. Join LevelFields to start investing smarter.
The best small-cap stocks vary based on sector trends, company performance, and current market conditions. Strong candidates often include companies with solid growth, innovative products, and manageable debt.
It depends on your risk tolerance and strategy. Platforms like LevelFields help identify small-caps with event-driven upside, which is ideal for active investors.
This changes monthly. Use AI stock screeners or platforms like LevelFields to track earnings growth, revenue momentum, and analyst upgrades.
Join LevelFields now to be the first to know about events that affect stock prices and uncover unique investment opportunities. Choose from events, view price reactions, and set event alerts with our AI-powered platform. Don't miss out on daily opportunities from 6,300 companies monitored 24/7. Act on facts, not opinions, and let LevelFields help you become a better trader.
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