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. That said, here is one small-cap stock that could be the next 100 bagger and two best left ignored.

Two Small-Cap Stocks to Sell:

Simply Good Foods (SMPL)

Market Cap: $3.06 billion

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Why Does SMPL Fall Short?

1. Smaller revenue base of $1.46 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its three-year trend
3. 5.5 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position

Simply Good Foods’s stock price of $30.59 implies a valuation ratio of 15.2x forward P/E. Read our free research report to see why you should think twice about including SMPL in your portfolio.

Timken (TKR)

Market Cap: $5.30 billion

Established after the founder noticed the difficulty freight wagons had making sharp turns, Timken (NYSE: TKR) is a provider of industrial parts used across various sectors.

Why Should You Dump TKR?

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. Projected sales growth of 1.9% for the next 12 months suggests sluggish demand
3. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 12.7% annually, worse than its revenue

Timken is trading at $76.09 per share, or 12.8x forward P/E. Dive into our free research report to see why there are better opportunities than TKR.

One Small-Cap Stock to Watch:

Vita Coco (COCO)

Market Cap: $2.00 billion

Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.

Why Do We Watch COCO?

1. Products are seeing elevated demand as its unit sales averaged 7.8% growth over the past two years
2. Earnings per share have massively outperformed its peers over the last three years, increasing by 195% annually
3. ROIC punches in at 47.7%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities

At $35 per share, Vita Coco trades at 27.2x forward P/E. Is now the time to initiate a position? Find out 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.

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