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. 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:
LGI Homes (LGIH)
Market Cap: $1.32 billion
Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
Why Do We Avoid LGIH?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 10.4% declines over the past two years
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $56.88 per share, LGI Homes trades at 8.7x forward P/E. To fully understand why you should be careful with LGIH, check out our full research report (it’s free).
Crane NXT (CXT)
Market Cap: $3.28 billion
Born from a corporate transformation completed in 2023, Crane NXT (NYSE: CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.
Why Do We Think Twice About CXT?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share fell by 15% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- 12 percentage point decline in its free cash flow margin over the last four years reflects the company’s increased investments to defend its market position
Crane NXT’s stock price of $60.55 implies a valuation ratio of 12.2x forward P/E. Check out our free in-depth research report to learn more about why CXT doesn’t pass our bar.
One Small-Cap Stock to Watch:
Montrose (MEG)
Market Cap: $865.2 million
Founded to protect a tree-lined two-lane road, Montrose (NYSE: MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.
Why Could MEG Be a Winner?
- Annual revenue growth of 18% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 132% over the last two years outstripped its revenue performance
- Free cash flow margin increased by 12.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Montrose is trading at $26.08 per share, or 17.7x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
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-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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