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. Keeping that in mind, 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:
Under Armour (UAA)
Market Cap: $2.68 billion
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Should You Sell UAA?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- 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× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Under Armour is trading at $6.40 per share, or 34.7x forward P/E. Read our free research report to see why you should think twice about including UAA in your portfolio.
Valaris (VAL)
Market Cap: $6.26 billion
Operating the world's largest fleet of offshore drilling rigs across six continents, Valaris (NYSE: VAL) provides offshore drilling rigs and crews to oil and gas companies exploring and producing in deep waters and shallow seas.
Why Do We Steer Clear of VAL?
- Sales tumbled by 5.3% annually over the last ten years, showing market trends are working against its favor during this cycle
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 21%
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $90.36 per share, Valaris trades at 28.8x forward P/E. Dive into our free research report to see why there are better opportunities than VAL.
One Small-Cap Stock to Buy:
CSW (CSW)
Market Cap: $4.87 billion
With over two centuries of combined operations manufacturing and supplying, CSW (NYSE: CSW) offers special chemicals, coatings, sealants, and lubricants for various industries.
Why Is CSW a Good Business?
- Impressive 21.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Earnings per share grew by 20.5% annually over the last two years, massively outpacing its peers
- Strong free cash flow margin of 15.4% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
CSW’s stock price of $295.80 implies a valuation ratio of 26.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
