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.
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 amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Cars.com (CARS)
Market Cap: $513.2 million
Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE: CARS) is a digital marketplace that connects new and used car buyers and sellers.
Why Does CARS Give Us Pause?
- Market opportunities are plateauing as its dealer customers were flat over the last two years
- Platform has lost its luster lately as engagement trends have been sluggish and its average revenue per buyer has declined by 1% annually
- Earnings per share lagged its peers over the last three years as they only grew by 1.4% annually
Cars.com is trading at $9.17 per share, or 4.4x forward EV/EBITDA. If you’re considering CARS for your portfolio, see our FREE research report to learn more.
Bright Horizons (BFAM)
Market Cap: $3.14 billion
Founded in 1986, Bright Horizons (NYSE: BFAM) is a global provider of child care, early education, and workforce support solutions.
Why Is BFAM Risky?
- Annual revenue growth of 16.3% over the last five years was below our standards for the consumer discretionary sector
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1.1 percentage points over the next year
- Improving returns on capital suggest management is identifying more profitable investments
Bright Horizons’s stock price of $59.64 implies a valuation ratio of 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than BFAM.
One Small-Cap Stock to Watch:
Workiva (WK)
Market Cap: $2.80 billion
Nicknamed "the Excel killer" by some finance professionals for its ability to eliminate spreadsheet chaos, Workiva (NYSE: WK) provides a cloud-based platform that enables organizations to streamline financial reporting, ESG, and compliance processes with connected data and automation.
Why Does WK Stand Out?
- Customers view its software as mission-critical to their operations as its ARR has averaged 22.1% growth over the last year
- Prominent and differentiated software leads to a stellar gross margin of 79.4%
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
At $49.71 per share, Workiva trades at 2.8x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
