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 amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Regal Rexnord (RRX)
Market Cap: $9.49 billion
Headquartered in Milwaukee, Regal Rexnord (NYSE: RRX) provides power transmission and industrial automation products.
Why Do We Think Twice About RRX?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share were flat over the last two years and fell short of the peer group average
- Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
Regal Rexnord’s stock price of $146.51 implies a valuation ratio of 13.4x forward P/E. Dive into our free research report to see why there are better opportunities than RRX.
CoreCivic (CXW)
Market Cap: $1.81 billion
Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE: CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.
Why Are We Out on CXW?
- Sluggish trends in its average available beds suggest customers aren’t adopting its solutions as quickly as the company hoped
- Earnings growth underperformed the sector average over the last four years as its EPS grew by just 1.9% annually
- Free cash flow margin dropped by 9.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
CoreCivic is trading at $17.79 per share, or 15.6x forward P/E. If you’re considering CXW for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Booz Allen Hamilton (BAH)
Market Cap: $9.80 billion
With roots dating back to 1914 and deep ties to nearly all U.S. cabinet-level departments, Booz Allen Hamilton (NYSE: BAH) provides management consulting, technology services, and cybersecurity solutions primarily to U.S. government agencies and military branches.
Why Are We Positive On BAH?
- Average organic revenue growth of 7.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Large revenue base of $11.71 billion and strong customer awareness give it distribution advantages
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets
At $82.95 per share, Booz Allen Hamilton trades at 14.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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-micro-cap company Tecnoglass (+1,754% 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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