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 be the next 100 bagger and two that could be down big.

Two Small-Cap Stocks to Sell:

Bath and Body Works (BBWI)

Market Cap: $6.16 billion

Spun off from L Brands in 2020, Bath & Body Works (NYSE: BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.

Why Are We Wary of BBWI?

1. Annual revenue growth of 6.2% over the last five years was below our standards for the consumer retail sector
2. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
3. Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its five-year trend

Bath and Body Works is trading at $28.70 per share, or 7.8x forward price-to-earnings. If you’re considering BBWI for your portfolio, see our FREE research report to learn more.

GXO Logistics (GXO)

Market Cap: $4.68 billion

With notable customers such as Nike and Apple, GXO (NYSE: GXO) manages outsourced supply chains and warehousing for various companies.

Why Are We Cautious About GXO?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Flat earnings per share over the last two years lagged its peers
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

GXO Logistics’s stock price of $39.42 implies a valuation ratio of 12.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why GXO doesn’t pass our bar.

One Small-Cap Stock to Buy:

Tecnoglass (TGLS)

Market Cap: $3.12 billion

The first-ever Colombian company to trade on the NASDAQ, Tecnoglass (NYSE: TGLS) is a manufacturer of architectural glass, windows, and aluminum products.

Why Are We Bullish on TGLS?

1. Annual revenue growth of 15.6% over the past five years was outstanding, reflecting market share gains this cycle
2. Highly efficient business model is illustrated by its impressive 27% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
3. Earnings per share have massively outperformed its peers over the last five years, increasing by 39.8% annually

At $66.55 per share, Tecnoglass trades at 15.6x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.