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.
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 may have trouble.
Two Small-Cap Stocks to Sell:
Wix (WIX)
Market Cap: $8.48 billion
Founded in 2006 in Tel Aviv, Wix.com (NASDAQ: WIX) offers a free and easy to operate website building platform.
Why Is WIX Not Exciting?
- Annual revenue growth of 11.5% over the last three years was below our standards for the software sector
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 68.1%
Wix is trading at $157.50 per share, or 4.5x forward price-to-sales. Read our free research report to see why you should think twice about including WIX in your portfolio.
Columbia Sportswear (COLM)
Market Cap: $3.38 billion
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Do We Pass on COLM?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $60.96 per share, Columbia Sportswear trades at 17.4x forward P/E. To fully understand why you should be careful with COLM, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Stride (LRN)
Market Cap: $6.12 billion
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Should You Buy LRN?
- Rise in enrollments indicates high demand for its offerings
- Free cash flow margin expanded by 6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Returns on capital are climbing as management makes more lucrative bets
Stride’s stock price of $142.30 implies a valuation ratio of 19.1x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
