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. 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:
EverQuote (EVER)
Market Cap: $636.4 million
Aiming to simplify a once complicated process, EverQuote (NASDAQ:EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers
Why Are We Cautious About EVER?
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
EverQuote’s stock price of $18.08 implies a valuation ratio of 3.6x forward EV/EBITDA. If you’re considering EVER for your portfolio, see our FREE research report to learn more.
UFP Industries (UFPI)
Market Cap: $4.34 billion
Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ:UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.
Why Are We Bearish on UFPI?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.4% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
At $78.51 per share, UFP Industries trades at 15.9x forward P/E. Check out our free in-depth research report to learn more about why UFPI doesn’t pass our bar.
One Small-Cap Stock to Buy:
Allison Transmission (ALSN)
Market Cap: $9.31 billion
Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Do We Love ALSN?
- Impressive 18.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 17.7% to outpace its revenue gains
- Robust free cash flow margin of 19.2% gives it many options for capital deployment
Allison Transmission is trading at $112.76 per share, or 10.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.