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. Keeping that in mind, 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:
Varonis Systems (VRNS)
Market Cap: $6.38 billion
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ: VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Does VRNS Give Us Pause?
- Revenue increased by 11% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Historical operating margin losses point to an inefficient cost structure
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.9 percentage points
Varonis Systems is trading at $56.75 per share, or 9.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than VRNS.
Kirby (KEX)
Market Cap: $4.61 billion
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Are We Wary of KEX?
- 4.4% annual revenue growth over the last two years was slower than its industrials peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7 percentage points
- ROIC of 3.2% reflects management’s challenges in identifying attractive investment opportunities
At $83.36 per share, Kirby trades at 11.8x forward P/E. If you’re considering KEX for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Concentrix (CNXC)
Market Cap: $3.50 billion
With a team of approximately 450,000 employees across 75 countries, Concentrix (NASDAQ: CNXC) designs and delivers customer experience solutions that help global brands manage their customer interactions across digital channels and contact centers.
Why Could CNXC Be a Winner?
- Impressive 22% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Economies of scale give it some operating leverage when demand rises
- Able to self-fund growth initiatives without relying on external capital thanks to its 5.5% free cash flow margin
Concentrix’s stock price of $56.59 implies a valuation ratio of 4.6x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 6 Stocks for this week. 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 Kadant (+351% 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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