Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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. That said, here is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
IMAX (IMAX)
Market Cap: $1.83 billion
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE:IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Does IMAX Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.2% annually over the last two years
- Revenue base of $377.7 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Underwhelming 1.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
IMAX’s stock price of $34.06 implies a valuation ratio of 22.4x forward P/E. Read our free research report to see why you should think twice about including IMAX in your portfolio.
United Bankshares (UBSI)
Market Cap: $5.58 billion
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ:UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Do We Avoid UBSI?
- Annual revenue growth of 4.5% over the last two years was below our standards for the banking sector
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 3.9% annually
- Estimated tangible book value per share growth of 6.2% for the next 12 months implies profitability will slow from its two-year trend
At $39.86 per share, United Bankshares trades at 1x forward P/B. Dive into our free research report to see why there are better opportunities than UBSI.
One Small-Cap Stock to Buy:
Distribution Solutions (DSGR)
Market Cap: $1.39 billion
Founded in 1952, Distribution Solutions (NASDAQ:DSGR) provides supply chain solutions and distributes industrial, safety, and maintenance products to various industries.
Why Do We Love DSGR?
- Impressive 15.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Strong unit economics and 33.6% gross margin provide ample funds for marketing and new product development
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 34.8% annually
Distribution Solutions is trading at $30.02 per share, or 18.5x 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 Growth Stocks for this month. 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.