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 is one small-cap stock that could amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Macy's (M)
Market Cap: $5.19 billion
With a storied history that began with its 1858 founding, Macy’s (NYSE: M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Are We Out on M?
- Recent store closures and weak same-store sales point to soft demand and an operational restructuring
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
Macy’s stock price of $19.76 implies a valuation ratio of 9.3x forward P/E. To fully understand why you should be careful with M, check out our full research report (it’s free).
Collegium Pharmaceutical (COLL)
Market Cap: $1.11 billion
Pioneering abuse-deterrent technology in a field plagued by addiction concerns, Collegium Pharmaceutical (NASDAQ: COLL) develops and markets specialty medications for treating moderate to severe pain, including abuse-deterrent opioid formulations.
Why Does COLL Fall Short?
- Revenue base of $780.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Costs have risen faster than its revenue over the last two years, causing its adjusted operating margin to decline by 4.8 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
At $33.44 per share, Collegium Pharmaceutical trades at 4.6x forward P/E. If you’re considering COLL for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Tetra Tech (TTEK)
Market Cap: $8.22 billion
With a 50-year legacy of "Leading with Science" and operations on all seven continents, Tetra Tech (NASDAQ: TTEK) provides high-end consulting and engineering services focused on water management, environmental solutions, and sustainable infrastructure for government and commercial clients worldwide.
Why Could TTEK Be a Winner?
- Market share has increased this cycle as its 13.3% annual revenue growth over the last five years was exceptional
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin grew by 3.6 percentage points over the last five years, giving the company more chips to play with
Tetra Tech is trading at $31.53 per share, or 20.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
