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:
Churchill Downs (CHDN)
Market Cap: $6.07 billion
Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.
Why Should You Dump CHDN?
- Annual revenue growth of 8.7% over the last two years was below our standards for the consumer discretionary sector
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 14.9% for the last two years
- Returns on capital are growing as management invests in more worthwhile ventures
Churchill Downs’s stock price of $90.90 implies a valuation ratio of 13x forward P/E. Check out our free in-depth research report to learn more about why CHDN doesn’t pass our bar.
FTI Consulting (FCN)
Market Cap: $4.60 billion
With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE: FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.
Why Do We Think Twice About FCN?
- Sales trends were unexciting over the last two years as its 3.6% annual growth was below the typical business services company
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 1.1% annually
- Free cash flow margin shrank by 2.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $153.60 per share, FTI Consulting trades at 14.9x forward P/E. Read our free research report to see why you should think twice about including FCN in your portfolio.
One Small-Cap Stock to Buy:
Brady (BRC)
Market Cap: $3.82 billion
Founded in 1914 and evolving through more than a century of industrial innovation, Brady (NYSE: BRC) manufactures and supplies identification solutions and workplace safety products that help companies identify and protect their premises, products, and people.
Why Are We Bullish on BRC?
- Market share has increased this cycle as its 9.9% annual revenue growth over the last two years was exceptional
- Exciting sales outlook for the upcoming 12 months calls for 30% growth, an acceleration from its two-year trend
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 15.4% exceeded its revenue gains over the last five years
Brady is trading at $91.98 per share, or 15.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
