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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.

Two Small-Cap Stocks to Sell:

Wynn Resorts (WYNN)

Market Cap: $9.37 billion

Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.

Why Does WYNN Give Us Pause?

1. 1.5% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Wynn Resorts is trading at $88.50 per share, or 18.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why WYNN doesn’t pass our bar.

KBR (KBR)

Market Cap: $6.40 billion

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

Why Are We Cautious About KBR?

1. Backlog growth averaged a weak 7.4% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
2. Operating margin of 5.1% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
3. ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities

At $48.31 per share, KBR trades at 12.7x forward price-to-earnings. Read our free research report to see why you should think twice about including KBR in your portfolio.

One Small-Cap Stock to Buy:

Inspire Medical Systems (INSP)

Market Cap: $5.41 billion

Founded in 2007, Inspire Medical Systems (NYSE: INSP) develops and markets products for obstructive sleep apnea (OSA), with its flagship product being a neurostimulation system designed to improve breathing during sleep.

Why Do We Love INSP?

1. Growing number of domestic medical centers reflects a desire to reach more customers in underserved markets
2. Earnings per share have massively outperformed its peers over the last five years, increasing by 26.5% annually
3. Free cash flow margin grew by 59.5 percentage points over the last five years, giving the company more chips to play with

Inspire Medical Systems’s stock price of $182 implies a valuation ratio of 93.3x forward price-to-earnings. Is now the time to initiate a position? 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.