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 be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
Victoria's Secret (VSCO)
Market Cap: $4.21 billion
Spun off from L Brands in 2020, Victoria’s Secret (NYSE: VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.
Why Do We Think Twice About VSCO?
- Muted 1.1% annual revenue growth over the last three years shows its demand lagged behind its consumer retail peers
- Subpar operating margin of 4.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 16.2% annually
Victoria's Secret is trading at $52.39 per share, or 14.9x forward P/E. Check out our free in-depth research report to learn more about why VSCO doesn’t pass our bar.
Golar LNG (GLNG)
Market Cap: $5.67 billion
Pioneering a way to monetize stranded gas reserves that would otherwise be uneconomical to develop, Golar LNG (NASDAQ: GLNG) converts ships into floating liquefied natural gas facilities that liquefy natural gas at offshore sites.
Why Are We Cautious About GLNG?
- Annual sales declines of 2.7% for the past five years show its products and services struggled to connect with the market during this cycle
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Golar LNG’s stock price of $56.01 implies a valuation ratio of 69.6x forward P/E. To fully understand why you should be careful with GLNG, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Vita Coco (COCO)
Market Cap: $3.81 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
Why Do We Love COCO?
- Products are selling at a rapid clip as its unit sales averaged an outstanding 13.8% growth rate over the past two years
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 52.4% annually
- ROIC punches in at 37.2%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
At $67.45 per share, Vita Coco trades at 36.3x 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 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%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. 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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
