Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
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 be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Accel Entertainment (ACEL)
Market Cap: $871.2 million
Established in Illinois, Accel Entertainment (NYSE: ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.
Why Do We Avoid ACEL?
- Demand for its offerings was relatively low as its number of video gaming terminals sold has underwhelmed
- Poor free cash flow margin of 4.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $10.47 per share, Accel Entertainment trades at 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than ACEL.
Icahn Enterprises (IEP)
Market Cap: $4.74 billion
Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.
Why Are We Wary of IEP?
- Sales tumbled by 9.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- 8× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Icahn Enterprises is trading at $7.92 per share, or 0.5x forward price-to-sales. If you’re considering IEP for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
Stride (LRN)
Market Cap: $2.71 billion
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Are We Bullish on LRN?
- Rise in enrollments indicates high demand for its offerings
- Free cash flow margin grew by 7.4 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are climbing as management makes more lucrative bets
Stride’s stock price of $62.96 implies a valuation ratio of 7.4x 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 .
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. 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 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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