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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Heartland Express (HTLD)
Market Cap: $917.9 million
Founded by the son of a trucker, Heartland Express (NASDAQ: HTLD) offers full-truckload deliveries across the United States and Mexico.
Why Are We Out on HTLD?
- Sales tumbled by 18.8% annually over the last two years, showing market trends are working against it during this cycle
- 14.5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Heartland Express’s stock price of $11.87 implies a valuation ratio of 49.4x forward P/E. Read our free research report to see why you should think twice about including HTLD in your portfolio.
Lincoln Financial Group (LNC)
Market Cap: $8.08 billion
Founded in 1905 by a group of Fort Wayne, Indiana businessmen who named the company after Abraham Lincoln, Lincoln National Corporation (NYSE: LNC) provides insurance, retirement plans, and wealth management products through its subsidiaries, operating under four main segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services.
Why Are We Wary of LNC?
- Net premiums earned plateaued over the last five years, signaling weak incremental demand for its insurance policies
- Earnings per share lagged its peers over the last five years as they only grew by 6.1% annually
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 14% annually over the last five years
Lincoln Financial Group is trading at $42.21 per share, or 0.8x forward P/B. Check out our free in-depth research report to learn more about why LNC doesn’t pass our bar.
One Small-Cap Stock to Buy:
ESCO (ESE)
Market Cap: $6.89 billion
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
What Makes ESE Stand Out?
- Annual revenue growth of 15.1% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 42.6% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 9.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $265.77 per share, ESCO trades at 29.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
