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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could be the next big thing and two that could be down big.

Two Small-Cap Stocks to Sell:

Olaplex (OLPX)

Market Cap: $1.05 billion

Rising to fame on TikTok because of its “bond building" hair products, Olaplex (NASDAQ: OLPX) offers products and treatments that repair the damage caused by traditional heat and chemical-based styling goods.

Why Do We Avoid OLPX?

1. Annual sales declines of 14.2% for the past three years show its products struggled to connect with the market
2. Sales were less profitable over the last three years as its earnings per share fell by 45.3% annually, worse than its revenue declines
3. Free cash flow margin dropped by 16.1 percentage points over the last year, implying the company became more capital intensive as competition picked up

At $1.61 per share, Olaplex trades at 21.4x forward P/E. Dive into our free research report to see why there are better opportunities than OLPX.

Custom Truck One Source (CTOS)

Market Cap: $1.16 billion

Inspired by a family gas station, Custom Truck One Source (NYSE: CTOS) is a distributor of trucks and heavy equipment.

Why Is CTOS Risky?

1. Sales trends were unexciting over the last two years as its 4.6% annual growth was below the typical industrials company
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 29.2 percentage points
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Custom Truck One Source is trading at $5.14 per share, or 69.7x forward P/E. If you’re considering CTOS for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Buy:

Badger Meter (BMI)

Market Cap: $7.15 billion

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE: BMI) provides water control and measure equipment to various industries.

Why Will BMI Outperform?

1. Impressive 20% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Earnings growth has trumped its peers over the last two years as its EPS has compounded at 36.4% annually
3. Strong free cash flow margin of 15.3% enables it to reinvest or return capital consistently

Badger Meter’s stock price of $242.62 implies a valuation ratio of 51.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 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