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 amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Griffon (GFF)
Market Cap: $4.26 billion
Initially in the defense industry, Griffon (NYSE: GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Why Are We Hesitant About GFF?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.4% annually over the last five years
- Sales are projected to tank by 6.7% over the next 12 months as its demand continues evaporating
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 7% annually
Griffon is trading at $94.01 per share, or 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than GFF.
Seadrill (SDRL)
Market Cap: $2.74 billion
Operating in water depths reaching 12,000 feet below the surface, Seadrill (NYSE: SDRL) owns and operates drillships and semi-submersible rigs that drill oil and gas wells in deepwater offshore locations.
Why Do We Pass on SDRL?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.6% annually over the last ten years
- Costly operations and weak unit economics result in an inferior gross margin of 36.3% that must be offset through higher production volumes
- Cash-burning history makes us doubt the long-term viability of its business model
Seadrill’s stock price of $44.35 implies a valuation ratio of 24.2x forward P/E. Check out our free in-depth research report to learn more about why SDRL doesn’t pass our bar.
One Small-Cap Stock to Buy:
Shift4 (FOUR)
Market Cap: $2.86 billion
Starting as a payment gateway provider in 1999 and now processing over $200 billion in annual payment volume, Shift4 Payments (NYSE: FOUR) provides integrated payment processing solutions and software that help businesses accept and manage transactions across in-store, online, and mobile channels.
Why Will FOUR Beat the Market?
- Annual revenue growth of 28.1% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 31.9% outpaced its revenue gains
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $36.30 per share, Shift4 trades at 6.3x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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.
