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.

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 be the next big thing and two best left ignored.

Two Small-Cap Stocks to Sell:

American Woodmark (AMWD)

Market Cap: $877.5 million

Starting as a small millwork shop, American Woodmark (NASDAQ:AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.

Why Do We Think AMWD Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.1% annually over the last two years
2. Earnings per share have dipped by 1.2% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. Free cash flow margin dropped by 5.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

American Woodmark is trading at $58.73 per share, or 7.8x forward price-to-earnings. Read our free research report to see why you should think twice about including AMWD in your portfolio, it’s free.

Artivion (AORT)

Market Cap: $1.02 billion

Formerly known as CryoLife until its 2022 rebranding, Artivion (NYSE:AORT) develops and manufactures medical devices and preserves human tissues used in cardiac and vascular surgical procedures for patients with aortic disease.

Why Are We Out on AORT?

1. Annual revenue growth of 7.1% over the last five years was below our standards for the healthcare sector
2. Revenue base of $388.5 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Incremental sales over the last five years were much less profitable as its earnings per share fell by 5.1% annually while its revenue grew

At $23.85 per share, Artivion trades at 49.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than AORT.

One Small-Cap Stock to Watch:

Upwork (UPWK)

Market Cap: $1.79 billion

Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ:UPWK) is an online platform where businesses and independent professionals connect to get work done.

Why Does UPWK Stand Out?

1. Monetization efforts are paying off as its average revenue per customer has grown by 8.4% annually over the last two years
2. Additional sales over the last three years increased its profitability as the 168% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin jumped by 21.1 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

Upwork’s stock price of $13.34 implies a valuation ratio of 10x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.