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:
Zumiez (ZUMZ)
Market Cap: $441.5 million
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Should You Sell ZUMZ?
- Store closures are a headwind for growth and suggest it’s rightsizing operations to optimize sales at existing locations
- Persistent operating margin losses suggest the business manages its expenses poorly
- Earnings per share have contracted by 39.7% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Zumiez is trading at $26.10 per share, or 29.5x forward P/E. Check out our free in-depth research report to learn more about why ZUMZ doesn’t pass our bar.
Hillenbrand (HI)
Market Cap: $2.24 billion
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Are We Out on HI?
- Sales tumbled by 2.7% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 16.4 percentage points
Hillenbrand’s stock price of $31.73 implies a valuation ratio of 12.3x forward P/E. Read our free research report to see why you should think twice about including HI in your portfolio.
One Small-Cap Stock to Buy:
Primoris (PRIM)
Market Cap: $6.71 billion
Listed on the NASDAQ in 2008, Primoris (NYSE:PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Do We Love PRIM?
- Backlog has averaged 143% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Earnings per share grew by 39.1% annually over the last two years, massively outpacing its peers
- Free cash flow margin grew by 5.9 percentage points over the last five years, giving the company more chips to play with
At $124.07 per share, Primoris trades at 22.7x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged 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 Exlservice (+354% 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.