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:
Lattice Semiconductor (LSCC)
Market Cap: $9.63 billion
A global leader in its category, Lattice Semiconductor (NASDAQ: LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Why Are We Cautious About LSCC?
- Sales tumbled by 17.8% annually over the last two years, showing market trends are working against its favor during this cycle
- Efficiency has decreased over the last five years as its operating margin fell by 15 percentage points
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.2% annually
Lattice Semiconductor’s stock price of $70.36 implies a valuation ratio of 54.7x forward P/E. Dive into our free research report to see why there are better opportunities than LSCC.
Custom Truck One Source (CTOS)
Market Cap: $1.49 billion
Inspired by a family gas station, Custom Truck One Source (NYSE: CTOS) is a distributor of trucks and heavy equipment.
Why Are We Wary of CTOS?
- Muted 4.1% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Free cash flow margin dropped by 24.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $6.58 per share, Custom Truck One Source trades at 219.3x forward P/E. To fully understand why you should be careful with CTOS, check out our full research report (it’s free for active Edge members).
One Small-Cap Stock to Watch:
Light & Wonder (LNW)
Market Cap: $6.10 billion
With names as crazy as Ultimate Fire Link Power 4 for its products, Light & Wonder (NASDAQ: LNW) is a gaming company supplying the casino industry with slot machines, table games, and digital games.
Why Are We Positive On LNW?
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 21.4%
- Share buybacks catapulted its annual earnings per share growth to 25.9%, which outperformed its revenue gains over the last five years
- Rising returns on capital show the company is starting to reap the benefits of its past investments
Light & Wonder is trading at $73.83 per share, or 11.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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 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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