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. Keeping that in mind, here is one small-cap stock that could amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Utz (UTZ)
Market Cap: $872.2 million
Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE:UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.
Why Do We Pass on UTZ?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Subscale operations are evident in its revenue base of $1.44 billion, meaning it has fewer distribution channels than its larger rivals
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $9.69 per share, Utz trades at 0.6x forward price-to-sales. Check out our free in-depth research report to learn more about why UTZ doesn’t pass our bar.
Applied Digital (APLD)
Market Cap: $8.39 billion
Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital (NASDAQ:APLD) designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.
Why Does APLD Fall Short?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 83.8% annually while its revenue grew
- Free cash flow margin dropped by 54.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Applied Digital’s stock price of $29.22 implies a valuation ratio of 70.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than APLD.
One Small-Cap Stock to Watch:
Installed Building Products (IBP)
Market Cap: $7.29 billion
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Why Does IBP Stand Out?
- Annual revenue growth of 13% over the last five years was superb and indicates its market share increased during this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 22.4% to outpace its revenue gains
- Industry-leading 21.5% return on capital demonstrates management’s skill in finding high-return investments, and its returns are growing as it capitalizes on even better market opportunities
Installed Building Products is trading at $265.33 per share, or 24.5x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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
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