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. 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:

Astec (ASTE)

Market Cap: $699.7 million

Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.

Why Are We Hesitant About ASTE?

1. Annual revenue growth of 1.2% over the last two years was below our standards for the industrials sector
2. Anticipated sales growth of 3.5% for the next year implies demand will be shaky
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 12.1 percentage points

At $30.45 per share, Astec trades at 12x forward price-to-earnings. To fully understand why you should be careful with ASTE, check out our full research report (it’s free).

TaskUs (TASK)

Market Cap: $1.06 billion

Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ: TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.

Why Does TASK Give Us Pause?

1. Muted 1.8% annual revenue growth over the last two years shows its demand lagged behind its business services peers
2. Earnings per share have dipped by 3.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities

TaskUs’s stock price of $11.49 implies a valuation ratio of 8.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why TASK doesn’t pass our bar.

One Small-Cap Stock to Buy:

Verra Mobility (VRRM)

Market Cap: $3.33 billion

Managing over 165 million tolling transactions per year, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.

Why Do We Love VRRM?

1. Annual revenue growth of 14.4% over the past five years was outstanding, reflecting market share gains this cycle
2. Offerings are mission-critical for businesses and result in a best-in-class gross margin of 62.3%
3. Strong free cash flow margin of 19.6% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business

Verra Mobility is trading at $20.25 per share, or 16x 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 9 Market-Beating Stocks. 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.