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 best left ignored.
Two Small-Cap Stocks to Sell:
RE/MAX (RMAX)
Market Cap: $243 million
Short for Real Estate Maximums, RE/MAX (NYSE: RMAX) operates a real estate franchise network spanning over 100 countries and territories.
Why Do We Steer Clear of RMAX?
- Performance surrounding its agents has lagged its peers
- Low free cash flow margin of 10.1% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Returns on capital are increasing as management makes relatively better investment decisions
At $11.40 per share, RE/MAX trades at 8.5x forward P/E. To fully understand why you should be careful with RMAX, check out our full research report (it’s free).
GoodRx (GDRX)
Market Cap: $1.25 billion
Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ: GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.
Why Do We Think GDRX Will Underperform?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Subscale operations are evident in its revenue base of $785.2 million, meaning it has fewer distribution channels than its larger rivals
- Underwhelming -0.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
GoodRx’s stock price of $3.63 implies a valuation ratio of 10.9x forward P/E. Read our free research report to see why you should think twice about including GDRX in your portfolio.
One Small-Cap Stock to Watch:
Hexcel (HXL)
Market Cap: $7.63 billion
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE: HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Why Is HXL on Our Radar?
- Sales outlook for the upcoming 12 months calls for 10.8% growth, an acceleration from its two-year trend
- Share buybacks catapulted its annual earnings per share growth to 44.8%, which outperformed its revenue gains over the last five years
- Free cash flow margin jumped by 7.9 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Hexcel is trading at $100.86 per share, or 39.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
