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.

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. 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:

Sensata Technologies (ST)

Market Cap: $4.16 billion

Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.

Why Do We Pass on ST?

1. Sales trends were unexciting over the last five years as its 2.7% annual growth was below the typical semiconductor company
2. Projected sales decline of 7.6% over the next 12 months indicates demand will continue deteriorating
3. Substandard operating profitability and its deterioration over the last five years limit its responsiveness to unforeseen market trends

Sensata Technologies’s stock price of $28.12 implies a valuation ratio of 8.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ST.

Chegg (CHGG)

Market Cap: $78.48 million

Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.

Why Do We Think CHGG Will Underperform?

1. Struggled with new customer acquisition as its services subscribers averaged 10.2% declines
2. Overall productivity fell over the last few years as its plummeting sales were accompanied by a decline in its EBITDA margin
3. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable

At $0.76 per share, Chegg trades at 0.6x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CHGG in your portfolio, it’s free.

One Small-Cap Stock to Watch:

Phreesia (PHR)

Market Cap: $1.60 billion

Founded in 2005 to streamline the traditionally paper-heavy patient check-in process, Phreesia (NYSE:PHR) provides software solutions that automate patient intake, registration, and payment processes for healthcare organizations while improving patient engagement in their care.

Why Do We Watch PHR?

1. Average customer growth of 21.7% over the past two years demonstrates success in acquiring new clients that could increase their spending in the future
2. Adjusted operating margin improvement of 44 percentage points over the last two years demonstrates its ability to scale efficiently
3. Earnings per share grew by 15.5% annually over the last five years and beat its peers

Phreesia is trading at $27.28 per share, or 32.2x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. 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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.