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 that may have trouble.

Two Small-Cap Stocks to Sell:

Advanced Energy (AEIS)

Market Cap: $5.94 billion

Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ: AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.

Why Should You Sell AEIS?

1. Annual sales declines of 5.9% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Advanced Energy is trading at $157.79 per share, or 28.2x forward P/E. Check out our free in-depth research report to learn more about why AEIS doesn’t pass our bar.

Ibotta (IBTA)

Market Cap: $759.4 million

Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE: IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.

Why Do We Think Twice About IBTA?

1. Subscale operations are evident in its revenue base of $367.6 million, meaning it has fewer distribution channels than its larger rivals
2. Estimated sales decline of 10.1% for the next 12 months implies a challenging demand environment

Ibotta’s stock price of $27.27 implies a valuation ratio of 6.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including IBTA in your portfolio.

One Small-Cap Stock to Buy:

Badger Meter (BMI)

Market Cap: $5.09 billion

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE: BMI) provides water control and measure equipment to various industries.

Why Will BMI Beat the Market?

1. Market share has increased this cycle as its 17.8% annual revenue growth over the last two years was exceptional
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 32.1% annually, topping its revenue gains
3. Robust free cash flow margin of 15.2% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business

At $173.29 per share, Badger Meter trades at 33.1x 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

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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

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