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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. 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:
Caesars Entertainment (CZR)
Market Cap: $4.99 billion
Formerly Eldorado Resorts, Caesars Entertainment (NASDAQ: CZR) is a global gaming and hospitality company operating numerous casinos, hotels, and resort properties.
Why Are We Hesitant About CZR?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last two years
- Earnings per share fell by 10% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $24.14 per share, Caesars Entertainment trades at 29.3x forward P/E. Check out our free in-depth research report to learn more about why CZR doesn’t pass our bar.
Universal Logistics (ULH)
Market Cap: $602.9 million
Founded in 1932, Universal Logistics (NASDAQ: ULH) is a provider of customized transportation and logistics solutions operating throughout the United States and in Mexico, Canada, and Colombia.
Why Do We Pass on ULH?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.1% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Universal Logistics’s stock price of $22.90 implies a valuation ratio of 8.8x forward P/E. If you’re considering ULH for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Semrush (SEMR)
Market Cap: $1.06 billion
Started by Oleg Shchegolev while still in university, Semrush (NYSE: SEMR) is a software-as-a-service platform that helps companies optimize their search engine and content marketing efforts.
Why Does SEMR Stand Out?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 23% over the last year
- Prominent and differentiated software results in a stellar gross margin of 81.4%
- Free cash flow margin is on track to jump by 5.9 percentage points next year, meaning the company will have more resources to pursue growth initiatives, repurchase shares, or pay dividends
Semrush is trading at $7.19 per share, or 2.2x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
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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