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 are two small-cap stocks that could amplify your portfolio’s returns and one best left ignored.
One Small-Cap Stock to Sell:
Under Armour (UAA)
Market Cap: $2.97 billion
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Do We Think UAA Will Underperform?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Under Armour’s stock price of $7.10 implies a valuation ratio of 42.6x forward P/E. To fully understand why you should be careful with UAA, check out our full research report (it’s free).
Two Small-Cap Stocks to Watch:
CarGurus (CARG)
Market Cap: $2.70 billion
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Do We Like CARG?
- Customers are spending more money on its platform as its average revenue per user has increased by 11.3% annually over the last two years
- Disciplined cost controls and effective management resulted in a strong two-year EBITDA margin of 29.2%, and its profitability increased over the last few years as it eliminated unnecessary expenses
- Free cash flow margin grew by 20.9 percentage points over the last few years, giving the company more chips to play with
CarGurus is trading at $28.24 per share, or 8.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
CECO Environmental (CECO)
Market Cap: $2.62 billion
With roots dating back to 1869 and a focus on creating cleaner industrial operations, CECO Environmental (NASDAQ: CECO) provides technology and expertise that helps industrial companies reduce emissions, treat water, and improve energy efficiency across various sectors.
Why Are We Bullish on CECO?
- Impressive 19% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Adjusted operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Improving returns on capital suggest its past investments are beginning to deliver value
At $73.50 per share, CECO Environmental trades at 56.7x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.
