Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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. That said, here is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Brunswick (BC)
Market Cap: $4.92 billion
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Should You Dump BC?
- Muted 4.8% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 6.4 percentage points over the next year
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Brunswick’s stock price of $75.68 implies a valuation ratio of 19x forward P/E. If you’re considering BC for your portfolio, see our FREE research report to learn more.
Knight-Swift Transportation (KNX)
Market Cap: $8.77 billion
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE: KNX) offers less-than-truckload and full truckload delivery services.
Why Is KNX Risky?
- Annual revenue growth of 3.7% over the last two years was below our standards for the industrials sector
- Free cash flow margin dropped by 10.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Knight-Swift Transportation is trading at $54.07 per share, or 29.6x forward P/E. Read our free research report to see why you should think twice about including KNX in your portfolio.
One Small-Cap Stock to Watch:
Lyft (LYFT)
Market Cap: $7.65 billion
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Are We Fans of LYFT?
- Active Riders have increased by an average of 11.2% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 33.8% outpaced its revenue gains
- Free cash flow margin increased by 25 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $19.18 per share, Lyft trades at 11.4x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Exlservice (+354% 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.
