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 be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Xponential Fitness (XPOF)
Market Cap: $239.5 million
Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE: XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.
Why Is XPOF Risky?
- Annual revenue declines of 4.4% over the last two years indicate problems with its market positioning
- Poor free cash flow margin of 1.3% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Xponential Fitness’s stock price of $5.62 implies a valuation ratio of 9.4x forward P/E. To fully understand why you should be careful with XPOF, check out our full research report (it’s free).
Acadia Healthcare (ACHC)
Market Cap: $2.35 billion
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ: ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Why Should You Sell ACHC?
- Disappointing admissions over the past two years indicate demand is soft and that the company may need to revise its strategy
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.7% annually
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Acadia Healthcare is trading at $25.29 per share, or 16.8x forward P/E. Read our free research report to see why you should think twice about including ACHC in your portfolio.
One Small-Cap Stock to Buy:
Northwest Pipe (NWPX)
Market Cap: $1.19 billion
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.
Why Will NWPX Beat the Market?
- Annual revenue growth of 13.6% over the past five years was outstanding, reflecting market share gains this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin expanded by 18.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $123.40 per share, Northwest Pipe trades at 24.7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
