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.
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 be the next 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
MasterCraft (MCFT)
Market Cap: $605.8 million
Started by a waterskiing instructor, MasterCraft (NASDAQ: MCFT) specializes in designing, manufacturing, and selling sport boats.
Why Do We Steer Clear of MCFT?
- Products and services have few die-hard fans as sales have declined by 6.7% annually over the last five years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
MasterCraft is trading at $25.01 per share, or 13.9x forward P/E. Dive into our free research report to see why there are better opportunities than MCFT.
SmartRent (SMRT)
Market Cap: $268.3 million
Founded by an employee at a real estate rental company, SmartRent (NYSE: SMRT) provides smart home devices and software for multifamily residential properties, single-family rental homes, and student housing communities.
Why Are We Wary of SMRT?
- Sales tumbled by 16.6% annually over the last two years, showing market trends are working against it during this cycle
- Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
- Cash-burning history makes us doubt the long-term viability of its business model
SmartRent’s stock price of $1.41 implies a valuation ratio of 41x forward EV-to-EBITDA. To fully understand why you should be careful with SMRT, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Zeta Global (ZETA)
Market Cap: $7.15 billion
Powered by an AI engine that processes over one trillion consumer signals monthly, Zeta Global (NYSE: ZETA) operates a data-driven cloud platform that helps companies target, connect, and engage with consumers through personalized marketing across channels like email, social media, and video.
Why Could ZETA Be a Winner?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 38.7% over the last year
- Notable projected revenue growth of 25.1% for the next 12 months hints at market share gains
- Free cash flow margin is on track to jump by 1.5 percentage points next year, meaning the company will have more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $28.28 per share, Zeta Global trades at 3.8x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
