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. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.
One Small-Cap Stock to Sell:
Levi's (LEVI)
Market Cap: $7.84 billion
Credited for inventing the first pair of blue jeans in 1873, Levi's (NYSE:LEVI) is an apparel company renowned for its iconic denim products and classic American style.
Why Do We Think LEVI Will Underperform?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Free cash flow margin is forecasted to shrink by 6.8 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Improving returns on capital suggest management is identifying more profitable investments
Levi’s stock price of $20.25 implies a valuation ratio of 13.2x forward P/E. If you’re considering LEVI for your portfolio, see our FREE research report to learn more.
Two Small-Cap Stocks to Buy:
VSE Corporation (VSEC)
Market Cap: $5.16 billion
With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ:VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.
What Makes VSEC Stand Out?
- Impressive 28.5% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 54.8%
- Earnings per share grew by 24.3% annually over the last two years and trumped its peers
At $164.08 per share, VSE Corporation trades at 21.8x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Talos Energy (TALO)
Market Cap: $2.97 billion
Operating its own deepwater production facilities with names like Tarantula, Pompano, and Brutus, Talos Energy (NYSE:TALO) explores for and produces oil and natural gas from offshore wells in the Gulf of Mexico and offshore Mexico.
Why Should You Buy TALO?
- Impressive 20.3% annual revenue growth over the last nine years indicates it’s winning market share this cycle
- Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 72.5%
- Robust free cash flow margin of 18.6% gives it many options for capital deployment
Talos Energy is trading at $17.82 per share, or 10x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.