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. That said, 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:
Conagra (CAG)
Market Cap: $6.87 billion
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE: CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Is CAG Risky?
- Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- 4.8 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
Conagra’s stock price of $14.32 implies a valuation ratio of 8.4x forward P/E. Dive into our free research report to see why there are better opportunities than CAG.
LKQ (LKQ)
Market Cap: $8.06 billion
A global distributor of vehicle parts and accessories, LKQ (NASDAQ: LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Why Should You Dump LKQ?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Free cash flow margin is projected to show no improvement next year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $31.31 per share, LKQ trades at 9.9x forward P/E. If you’re considering LKQ for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
GitLab (GTLB)
Market Cap: $3.77 billion
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Is GTLB a Good Business?
- ARR growth averaged 26.4% over the last year, showing customers are willing to take multi-year bets on its software
- 120% net revenue retention rate indicates success in expanding revenue within existing accounts
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 87.4%
GitLab is trading at $22.94 per share, or 3.3x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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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.
