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 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Campbell's (CPB)
Market Cap: $8.40 billion
With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ:CPB) is a packaged food company with an illustrious portfolio of brands.
Why Is CPB Risky?
- Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Sales are projected to tank by 2.3% over the next 12 months as demand evaporates
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 1.3% annually
Campbell’s stock price of $28.33 implies a valuation ratio of 11.6x forward P/E. Read our free research report to see why you should think twice about including CPB in your portfolio.
Driven Brands (DRVN)
Market Cap: $2.50 billion
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Are We Wary of DRVN?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
Driven Brands is trading at $15.35 per share, or 10.5x forward P/E. Check out our free in-depth research report to learn more about why DRVN doesn’t pass our bar.
One Small-Cap Stock to Watch:
e.l.f. Beauty (ELF)
Market Cap: $4.69 billion
Short for "eyes, lips, face", e.l.f. Beauty (NYSE:ELF) is a developer of high-quality beauty products at accessible price points.
Why Do We Watch ELF?
- Remarkable 45.7% revenue growth over the last three years demonstrates its ability to capture significant market share
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 40.3% annually
- Free cash flow margin jumped by 8.4 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $78.09 per share, e.l.f. Beauty trades at 25.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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 9 Market-Beating Stocks. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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