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.
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 amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Stitch Fix (SFIX)
Market Cap: $480.6 million
One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Should You Sell SFIX?
- Demand for its offerings was relatively low as its number of active clients has underwhelmed
- Poor expense management has led to operating margin losses
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.6% for the last two years
At $3.48 per share, Stitch Fix trades at 7.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SFIX.
Mohawk Industries (MHK)
Market Cap: $6.44 billion
Established in 1878, Mohawk Industries (NYSE:MHK) is a leading producer of floor-covering products for both residential and commercial applications.
Why Are We Out on MHK?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2% over the last five years was below our standards for the consumer discretionary sector
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2 percentage points over the next year
- ROIC hasn’t moved, making investors question whether its recent investments can increase profitability
Mohawk Industries’s stock price of $105.66 implies a valuation ratio of 12.3x forward P/E. To fully understand why you should be careful with MHK, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Crescent Energy (CRGY)
Market Cap: $3.96 billion
Controlling over 1.4 million net acres across proven U.S. basins, Crescent Energy (NYSE:CRGY) extracts oil and natural gas from underground reservoirs in Texas and the Rocky Mountains.
Why Are We Bullish on CRGY?
- Market share has increased this cycle as its 41.5% annual revenue growth over the last five years was exceptional
- Attractive asset base lead to a stellar gross margin of 59%
- CRGY is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Crescent Energy is trading at $12.03 per share, or 4.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.