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:
Columbus McKinnon (CMCO)
Market Cap: $598.5 million
With 19 different brands across the globe, Columbus McKinnon (NASDAQ:CMCO) offers material handling equipment for the construction, manufacturing, and transportation industries.
Why Do We Avoid CMCO?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Sales over the last two years were less profitable as its earnings per share fell by 11.3% annually while its revenue was flat
- Free cash flow margin dropped by 3.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Columbus McKinnon is trading at $21.05 per share, or 7.8x forward P/E. To fully understand why you should be careful with CMCO, check out our full research report (it’s free).
Ducommun (DCO)
Market Cap: $1.81 billion
California’s oldest company, Ducommun (NYSE:DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.
Why Are We Cautious About DCO?
- New orders were hard to come by as its average backlog growth of 4.8% over the past two years underwhelmed
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 12.2 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $121.54 per share, Ducommun trades at 27.6x forward P/E. Dive into our free research report to see why there are better opportunities than DCO.
One Small-Cap Stock to Watch:
Tetra Tech (TTEK)
Market Cap: $10.18 billion
With a 50-year legacy of "Leading with Science" and operations on all seven continents, Tetra Tech (NASDAQ:TTEK) provides high-end consulting and engineering services focused on water management, environmental solutions, and sustainable infrastructure for government and commercial clients worldwide.
Why Are We Fans of TTEK?
- Impressive 13.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- TTEK is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Tetra Tech’s stock price of $39 implies a valuation ratio of 24x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.