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.
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 amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Scholastic (SCHL)
Market Cap: $722.2 million
Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ: SCHL) is an international company specializing in children's publishing, education, and media services.
Why Do We Think SCHL Will Underperform?
- Annual revenue declines of 1.7% over the last two years indicate problems with its market positioning
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $28.42 per share, Scholastic trades at 18.4x forward P/E. Dive into our free research report to see why there are better opportunities than SCHL.
MarketAxess (MKTX)
Market Cap: $6.43 billion
Pioneering the shift from phone-based to electronic bond trading since 2000, MarketAxess (NASDAQ: MKTX) operates electronic trading platforms that enable institutional investors and broker-dealers to efficiently trade fixed-income securities like corporate and government bonds.
Why Are We Hesitant About MKTX?
- Muted 6.4% annual revenue growth over the last five years shows its demand lagged behind its financials peers
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
MarketAxess is trading at $172.13 per share, or 22.3x forward P/E. If you’re considering MKTX for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
Remitly (RELY)
Market Cap: $3.28 billion
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ: RELY) is an online platform that enables consumers to safely and quickly send money globally.
Why Are We Backing RELY?
- Active Customers have grown by 34.5% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 76.4% annually, topping its revenue gains
- Free cash flow margin expanded by 33.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Remitly’s stock price of $15.98 implies a valuation ratio of 14.5x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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 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
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