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.

The downside that can come from buying these securities is precisely why we started StockStory - to do the heavy lifting so you can invest with confidence. That said, here is one small-cap stock that could be the next 100 bagger and two that could be down big.

Two Small-Cap Stocks to Sell:

Universal Technical Institute (UTI)

Market Cap: $1.56 billion

Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.

Why Do We Steer Clear of UTI?

1. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.6 percentage points over the next year
2. Underwhelming 11% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging

At $28.53 per share, Universal Technical Institute trades at 25.6x forward price-to-earnings. Read our free research report to see why you should think twice about including UTI in your portfolio, it’s free.

Terex (TEX)

Market Cap: $2.82 billion

With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.

Why Does TEX Give Us Pause?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Gross margin of 20.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 1.5 percentage points

Terex is trading at $42.42 per share, or 8.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TEX.

One Small-Cap Stock to Buy:

Byrna (BYRN)

Market Cap: $626 million

Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ:BYRN) is a provider of non-lethal weapons.

Why Is BYRN a Top Pick?

1. Annual revenue growth of 33.6% over the last two years was superb and indicates its market share increased during this cycle
2. Operating margin expanded by 30.4 percentage points over the last five years as it scaled and became more efficient
3. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 88.2% outpaced its revenue gains

Byrna’s stock price of $28.44 implies a valuation ratio of 98.5x forward price-to-earnings. 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

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started by checking out our Top 9 Market-Beating Stocks. 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.