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 is one small-cap stock that could be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Designer Brands (DBI)
Market Cap: $175 million
Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE: DBI) is an American discount retailer focused on footwear and accessories.
Why Should You Sell DBI?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- ROIC of -0.3% reflects management’s challenges in identifying attractive investment opportunities
- High net-debt-to-EBITDA ratio of 9× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Designer Brands’s stock price of $3.67 implies a valuation ratio of 7.1x forward P/E. If you’re considering DBI for your portfolio, see our FREE research report to learn more.
GATX (GATX)
Market Cap: $5.23 billion
Originally founded to ship beer, GATX (NYSE: GATX) provides leasing and management services for railcars and other transportation assets globally.
Why Are We Cautious About GATX?
- Number of active railcars has disappointed over the past two years, indicating weak demand for its offerings
- 32.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- 9× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
GATX is trading at $146.47 per share, or 16.2x forward P/E. To fully understand why you should be careful with GATX, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Fiverr (FVRR)
Market Cap: $1.15 billion
Based in Tel Aviv, Fiverr (NYSE: FVRR) operates a fixed price global freelance marketplace for digital services.
Why Are We Fans of FVRR?
- Monetization efforts are paying off as its average revenue per buyer has grown by 17.4% annually over the last two years
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 52.1% outpaced its revenue gains
- Free cash flow margin grew by 9.7 percentage points over the last few years, giving the company more chips to play with
At $31.88 per share, Fiverr trades at 13.6x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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.
