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 be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Reynolds (REYN)
Market Cap: $4.66 billion
Best known for its aluminum foil, Reynolds (NASDAQ:REYN) is a household products company whose products focus on food storage, cooking, and waste.
Why Do We Think REYN Will Underperform?
- Declining unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- 5.8 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
At $22.17 per share, Reynolds trades at 13.7x forward P/E. Dive into our free research report to see why there are better opportunities than REYN.
VF Corp (VFC)
Market Cap: $4.71 billion
Owner of The North Face, Vans, and Supreme, VF Corp (NYSE:VFC) is a clothing conglomerate specializing in branded lifestyle apparel, footwear, and accessories.
Why Are We Out on VFC?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
VF Corp’s stock price of $12.10 implies a valuation ratio of 13.8x forward P/E. Read our free research report to see why you should think twice about including VFC in your portfolio.
One Small-Cap Stock to Buy:
Wingstop (WING)
Market Cap: $9.45 billion
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Is WING a Top Pick?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Average same-store sales growth of 14.6% over the past two years indicates its restaurants are resonating with diners
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 25.5%
Wingstop is trading at $338.10 per share, or 78.2x 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
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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