Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. 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:
EverQuote (EVER)
Market Cap: $773.8 million
Aiming to simplify a once complicated process, EverQuote (NASDAQ: EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers
Why Is EVER Not Exciting?
- 6.1% annual revenue growth over the last three years was slower than its consumer internet peers
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
EverQuote’s stock price of $21.18 implies a valuation ratio of 12.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than EVER.
Topgolf Callaway (MODG)
Market Cap: $1.16 billion
Formed between the merger of Callaway and Topgolf, Topgolf Callaway (NYSE: MODG) sells golf equipment and operates technology-driven golf entertainment venues.
Why Should You Sell MODG?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Low free cash flow margin of -0.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $6.01 per share, Topgolf Callaway trades at 368.5x forward price-to-earnings. Read our free research report to see why you should think twice about including MODG in your portfolio.
One Small-Cap Stock to Buy:
Remitly (RELY)
Market Cap: $4.08 billion
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ: RELY) is an online platform that enables consumers to safely and quickly send money globally.
Why Are We Backing RELY?
- Active Customers have grown by 39.9% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 88.9% outpaced its revenue gains
- Free cash flow margin increased by 19.3 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Remitly is trading at $19.52 per share, or 22.4x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
