Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
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 amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
OneWater (ONEW)
Market Cap: $225 million
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Does ONEW Fall Short?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Earnings per share have contracted by 54.5% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
OneWater is trading at $13.79 per share, or 7.5x forward P/E. If you’re considering ONEW for your portfolio, see our FREE research report to learn more.
Crane NXT (CXT)
Market Cap: $3.25 billion
Born from a corporate transformation completed in 2023, Crane NXT (NYSE: CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.
Why Are We Wary of CXT?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Smaller revenue base of $1.50 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Earnings per share have dipped by 2.2% annually over the past one years, which is concerning because stock prices follow EPS over the long term
At $58.80 per share, Crane NXT trades at 12.9x forward P/E. To fully understand why you should be careful with CXT, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Freshworks (FRSH)
Market Cap: $4.52 billion
Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
Why Are We Positive On FRSH?
- Customers view its software as mission-critical to their operations as its ARR has averaged 19.9% growth over the last year
- Superior software functionality and low servicing costs lead to a stellar gross margin of 84.4%
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Freshworks’s stock price of $15.32 implies a valuation ratio of 5.5x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full 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 9 Market-Beating Stocks. 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
