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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
MGM Resorts (MGM)
Market Cap: $9.82 billion
Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE: MGM) is a global hospitality and entertainment company known for its resorts and casinos.
Why Do We Steer Clear of MGM?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.1% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
MGM Resorts is trading at $38.25 per share, or 21.1x forward P/E. Dive into our free research report to see why there are better opportunities than MGM.
Enviri (NVRI)
Market Cap: $1.62 billion
Cooling America’s first indoor ice rink in the 19th century, Enviri (NYSE: NVRI) offers steel and waste handling services.
Why Do We Think NVRI Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.5% annually over the last two years
- Cash burn makes us question whether it can achieve sustainable long-term growth
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $19.60 per share, Enviri trades at 21.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including NVRI in your portfolio.
One Small-Cap Stock to Watch:
Barrett (BBSI)
Market Cap: $774.1 million
Operating as a professional employer organization (PEO) that serves over 8,000 companies with more than 120,000 worksite employees, Barrett Business Services (NASDAQ: BBSI) provides management solutions that help small and mid-sized businesses handle human resources, payroll, workers' compensation, and other administrative functions.
Why Does BBSI Stand Out?
- Annual revenue growth of 7.8% over the last two years beat the sector average and underscores the unique value of its offerings
- Free cash flow margin expanded by 6.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Barrett’s stock price of $31.52 implies a valuation ratio of 0.6x trailing 12-month price-to-sales. Is now the time to initiate a position? 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.
