Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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 amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Etsy (ETSY)
Market Cap: $7.81 billion
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NYSE: ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Why Do We Think Twice About ETSY?
- Value proposition isn’t resonating strongly as its active buyers averaged 2.1% drops over the last two years
- Projected sales growth of 1.7% for the next 12 months suggests sluggish demand
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 1.4% annually
Etsy’s stock price of $83.57 implies a valuation ratio of 14.5x forward EV/EBITDA. If you’re considering ETSY for your portfolio, see our FREE research report to learn more.
United Parks & Resorts (PRKS)
Market Cap: $2.09 billion
Parent company of SeaWorld and home of the world-famous Shamu, United Parks & Resorts (NYSE: PRKS) is a theme park chain featuring marine life, live entertainment, roller coasters, and waterparks.
Why Are We Out on PRKS?
- Number of visitors has disappointed over the past two years, indicating weak demand for its offerings
- Poor free cash flow margin of 12.4% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
United Parks & Resorts is trading at $44.26 per share, or 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than PRKS.
One Small-Cap Stock to Buy:
Limbach (LMB)
Market Cap: $571.6 million
Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.
Why Is LMB a Good Business?
- Annual revenue growth of 15.6% over the last two years was superb and indicates its market share increased during this cycle
- Additional sales over the last two years increased its profitability as the 20% annual growth in its earnings per share outpaced its revenue
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are growing as it capitalizes on even better market opportunities
At $48.02 per share, Limbach trades at 11.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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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.
