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.

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 best left ignored.

Two Small-Cap Stocks to Sell:

EVgo (EVGO)

Market Cap: $343.2 million

Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ: EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.

Why Are We Hesitant About EVGO?

1. Historical operating losses point to an inefficient cost structure
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $2.50 per share, EVgo trades at 167.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why EVGO doesn’t pass our bar.

LifeStance Health Group (LFST)

Market Cap: $2.55 billion

With over 6,600 licensed mental health professionals treating more than 880,000 patients annually, LifeStance Health (NASDAQ: LFST) provides outpatient mental health services through a network of clinicians offering psychiatric evaluations, psychological testing, and therapy across 33 states.

Why Do We Think Twice About LFST?

1. Subscale operations are evident in its revenue base of $1.25 billion, meaning it has fewer distribution channels than its larger rivals
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 6.6 percentage points
3. Negative returns on capital show that some of its growth strategies have backfired

LifeStance Health Group is trading at $6.51 per share, or 216.2x forward price-to-earnings. To fully understand why you should be careful with LFST, check out our full research report (it’s free).

One Small-Cap Stock to Buy:

American Superconductor (AMSC)

Market Cap: $623.5 million

Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.

Why Are We Bullish on AMSC?

1. Market share has increased this cycle as its 39% annual revenue growth over the last two years was exceptional
2. Free cash flow turned positive over the last five years, showing the company is at an important crossroads
3. Returns on capital are increasing as management’s prior bets are starting to bear fruit

American Superconductor’s stock price of $15.74 implies a valuation ratio of 38.2x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our 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 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.