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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two that may have trouble.

Two Small-Cap Stocks to Sell:

Agilysys (AGYS)

Market Cap: $2.06 billion

With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.

Why Is AGYS Not Exciting?

1. Sales trends were unexciting over the last five years as its 17.2% annual growth was below the typical software company
2. High servicing costs result in a relatively inferior gross margin of 61.7% that must be offset through increased usage
3. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient

Agilysys is trading at $73.31 per share, or 6.1x forward price-to-sales. Check out our free in-depth research report to learn more about why AGYS doesn’t pass our bar.

Lake City Bank (LKFN)

Market Cap: $1.43 billion

Dating back to 1872 and deeply rooted in Indiana's communities, Lakeland Financial Corporation (NASDAQ: LKFN) operates Lake City Bank, providing commercial and consumer banking services throughout Northern and Central Indiana.

Why Should You Sell LKFN?

1. 5.2% annual revenue growth over the last five years was slower than its banking peers
2. 6.3% annual net interest income growth over the last five years was slower than its banking peers
3. Performance over the past five years shows its incremental sales were less profitable, as its 4% annual earnings per share growth trailed its revenue gains

At $56.58 per share, Lake City Bank trades at 1.7x forward P/B. Dive into our free research report to see why there are better opportunities than LKFN.

One Small-Cap Stock to Watch:

Arcos Dorados (ARCO)

Market Cap: $1.69 billion

Translating to “Golden Arches” in Spanish, Arcos Dorados (NYSE: ARCO) is the master franchisee of the McDonald's brand in Latin America and the Caribbean, responsible for its operations and growth in over 20 countries.

Why Is ARCO Interesting?

1. New restaurant openings and solid same-store sales performance have boosted its top-line growth
2. Average same-store sales growth of 22.7% over the past two years indicates its restaurants are resonating with diners
3. Economies of scale give it more fixed cost leverage than its smaller competitors

Arcos Dorados’s stock price of $8.15 implies a valuation ratio of 6.9x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

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.