Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.

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 be the next 100 bagger and two that may have trouble.

Two Small-Cap Stocks to Sell:

Lincoln Educational (LINC)

Market Cap: $726 million

Established in 1946, Lincoln Educational (NASDAQ: LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.

Why Do We Avoid LINC?

1. Number of enrolled students has disappointed over the past two years, indicating weak demand for its offerings
2. Negative free cash flow raises questions about the return timeline for its investments
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Lincoln Educational’s stock price of $22.98 implies a valuation ratio of 11.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why LINC doesn’t pass our bar.

Bel Fuse (BELFA)

Market Cap: $1.26 billion

Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.

Why Are We Cautious About BELFA?

1. Sales tumbled by 10% annually over the last two years, showing market trends are working against its favor during this cycle
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

At $91.49 per share, Bel Fuse trades at 9.7x forward EV-to-EBITDA. If you’re considering BELFA for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Watch:

KBR (KBR)

Market Cap: $6.11 billion

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

Why Are We Fans of KBR?

1. 10.3% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
2. Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
3. Share repurchases over the last five years enabled its annual earnings per share growth of 16% to outpace its revenue gains

KBR is trading at $47.07 per share, or 12.2x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2024 "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.

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