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. Keeping that in mind, here is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
The ONE Group (STKS)
Market Cap: $55.68 million
Doubling as a hospitality services provider for hotels and resorts, The One Group Hospitality (NASDAQ: STKS) is an upscale restaurant company that operates STK Steakhouse and Kona Grill.
Why Do We Think STKS Will Underperform?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Earnings per share fell by 54.6% annually over the last six years while its revenue grew, showing its incremental sales were much less profitable
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
The ONE Group’s stock price of $1.80 implies a valuation ratio of 4.8x forward P/E. Check out our free in-depth research report to learn more about why STKS doesn’t pass our bar.
PENN Entertainment (PENN)
Market Cap: $1.97 billion
Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Why Should You Dump PENN?
- Muted 11.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
PENN Entertainment is trading at $14.75 per share, or 17.9x forward P/E. Read our free research report to see why you should think twice about including PENN in your portfolio.
One Small-Cap Stock to Watch:
Universal Display (OLED)
Market Cap: $5.66 billion
Serving major consumer electronics manufacturers, Universal Display (NASDAQ: OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.
Why Are We Fans of OLED?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 10.5% annual sales growth over the last five years
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 75.3%
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 37.8%
At $118.51 per share, Universal Display trades at 22.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
