3 Quality Small Cap Stocks To Watch In October 2026

AI linked trade is picking up speed, with the WTO now expecting global merchandise flows to grow 3.9% this year as spending on AI related goods pulls more freight across borders. That kind of broad demand can reward smaller high quality companies that quietly build the plumbing behind bigger trends. This article highlights three under the radar US stocks from a rigorous quality screen that aims to surface those potential beneficiaries.

The companies below are only a small sample from this theme. The full screen surfaces 17 more high quality small caps that share similarly compelling business stories and are not covered here.

If you want to identify and analyze those additional candidates in one place, head straight into the High-Quality Undiscovered Gems screener.

IDT (IDT)

IDT brings the High-Quality Undiscovered Gems theme to life through its National Retail Solutions arm, which gives thousands of independent retailers point of sale hardware, payments and data tools, even though this is still smaller than its traditional communications operations.

IDT runs a mix of communications and fintech services, with Traditional Communications generating about US$865.9 million of revenue, Fintech US$176.0 million, Net2phone US$96.6 million and National Retail Solutions US$159.4 million, while the whole group is valued at roughly US$2.0b.

For this screener, the appeal is that IDT’s higher growth fintech and merchant-payments engines are starting to shape the story far more than its legacy telecom roots.

"The rotation thesis itself NRS, Fintech, and net2phone absorbing a growing share of consolidated profitability while remaining a third of revenue, holds across both calls, and the current figures are the stronger of the two: full-year Adjusted EBITDA from the three growth segments rose $22 million to 53% of the consolidated total, up from 46% a year earlier."

What happens to IDT’s earnings profile if that quiet internal shift keeps pushing profitability toward the higher margin side of the house?

If that earnings mix really is decoupling from legacy telecom, read the full narrative for IDT to see how that shift could reshape IDT’s long term profile.

Maximus (MMS)

Maximus fits the High-Quality Undiscovered Gems theme through its government funded workforce services. U.S. Services supports employment programs that are usually off the radar for big funds, even though U.S. Federal Services currently brings in the largest share of revenue.

Maximus runs government service contracts across health, human services and employment programs, generating about US$3.0b from U.S. Federal Services, US$1.7b from U.S. Services and US$561 million from Outside the U.S., with the whole business valued at roughly US$2.9b.

For this screen, a smaller employment focused division inside that U.S. Services arm aligns directly with the theme, even while larger federal and international work still anchors the revenue mix.

"AI enabled automation is now embedded in the majority of Maximus bidding activity, with around 75% to 80% of new bids and rebids containing explicit AI requirements and early deployments on five contracts contributing around a 3.5 percentage point operating margin uplift."

A key question is what happens to Maximus margins if one underappreciated shift in how governments buy these services continues to build from here.

If that shift in how governments procure services accelerates, read the full narrative for Maximus to see how Maximus could turn AI infused contracts into a more powerful earnings engine.

HCI Group (HCI)

HCI Group blends a traditional homeowners insurer with a tech driven Exzeo platform that fits the High-Quality Undiscovered Gems theme. Most revenue still comes from insurance operations at about US$852.7 million, with roughly US$230.4 million from Exzeo and a market value near US$2.3b.

HCI Group brings a different flavor to this theme by pairing a sizeable Florida focused insurer with a fast scaling Exzeo InsurTech platform that quietly turns underwriting know how into software and services.

"The 2026 to 2027 catastrophe reinsurance program that increased coverage while reducing ceded premiums by over 10% and is expected to save more than US$10m per quarter, supported by the build out of Fortex Re and tokenized reinsurance securities, provides a path for lower cost of risk that can support combined ratios and net margins."

The real swing factor is how one emerging source of fee based earnings ultimately reshapes where HCI Group’s future profit mix lands.

That shift in HCI Group’s profit mix is only the starting point, and the full narrative for HCI Group maps how that reinsurance and fee engine could accelerate from here.

Seeking Fresh Alternatives Before Others

Fresh ideas move first. Markets reward those who spot quiet momentum before it becomes a breakout story and before data gets stale. Scan these under the radar opportunities and consider them promptly.

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• Consider structural demand for critical materials by using the hand picked 33 best rare earth metal stocks while these producers are still attracting relatively limited attention.
• Review opportunities related to the next hardware and infrastructure cycle by running the focused 91 AI infrastructure stocks before capital flows concentrate more heavily in the same group of enablers.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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