Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
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:
Sally Beauty (SBH)
Market Cap: $1.29 billion
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Are We Hesitant About SBH?
- Dearth of new stores suggests management is prioritizing the optimization of its existing locations over growth
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Subscale operations are evident in its revenue base of $3.73 billion, meaning it has fewer distribution channels than its larger rivals
Sally Beauty’s stock price of $13.01 implies a valuation ratio of 6.5x forward P/E. Check out our free in-depth research report to learn more about why SBH doesn’t pass our bar.
AerSale (ASLE)
Market Cap: $294.9 million
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ: ASLE) delivers full-service support to mid-life commercial aircraft.
Why Do We Think ASLE Will Underperform?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 36.5 percentage points
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $6.33 per share, AerSale trades at 0.9x trailing 12-month price-to-sales. To fully understand why you should be careful with ASLE, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
Primoris (PRIM)
Market Cap: $5.13 billion
Listed on the NASDAQ in 2008, Primoris (NYSE: PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Could PRIM Be a Winner?
- Market share has increased this cycle as its 16% annual revenue growth over the last five years was exceptional
- Average backlog growth of 86.5% over the past two years shows it has a steady sales pipeline that will drive future orders
- Earnings per share grew by 29.1% annually over the last two years, massively outpacing its peers
Primoris is trading at $73.75 per share, or 19.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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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.
