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.

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 be the next big thing and two best left ignored.

Two Small-Cap Stocks to Sell:

iHeartMedia (IHRT)

Market Cap: $241.6 million

Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.

Why Is IHRT Risky?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 15.9% annually
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

iHeartMedia’s stock price of $1.65 implies a valuation ratio of 0.3x forward EV-to-EBITDA. If you’re considering IHRT for your portfolio, see our FREE research report to learn more.

Matson (MATX)

Market Cap: $4.24 billion

Founded by a Swedish orphan, Matson (NYSE:MATX) is a provider of ocean transportation and logistics services.

Why Does MATX Fall Short?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 11.2% annually over the last two years
2. Earnings per share have contracted by 27.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $129 per share, Matson trades at 12.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why MATX doesn’t pass our bar.

One Small-Cap Stock to Watch:

TopBuild (BLD)

Market Cap: $8.75 billion

Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.

Why Are We Fans of BLD?

1. Annual revenue growth of 15.2% over the past five years was outstanding, reflecting market share gains this cycle
2. Share buybacks catapulted its annual earnings per share growth to 30.8%, which outperformed its revenue gains over the last five years
3. Industry-leading 18.4% return on capital demonstrates management’s skill in finding high-return investments, and its rising returns show it’s making even more lucrative bets

TopBuild is trading at $300.02 per share, or 13.4x forward price-to-earnings. Is now a good time to buy? Find out in our full 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 6 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.