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.
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. Keeping that in mind, 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:
Trinity (TRN)
Market Cap: $2.72 billion
Operating under the trade name TrinityRail, Trinity (NYSE: TRN) is a provider of railcar products and services in North America.
Why Is TRN Not Exciting?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 25.8% declines over the past two years
- Gross margin of 21.3% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Free cash flow margin shrank by 22.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Trinity is trading at $35.31 per share, or 14x forward P/E. To fully understand why you should be careful with TRN, check out our full research report (it’s free).
AMC Entertainment (AMC)
Market Cap: $1.72 billion
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE: AMC) operates movie theaters primarily in the US and Europe.
Why Are We Out on AMC?
- 2.3% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Free cash flow margin is projected to show no improvement next year
- High net-debt-to-EBITDA ratio of 16× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $2.00 per share, AMC Entertainment trades at 14.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why AMC doesn’t pass our bar.
One Small-Cap Stock to Buy:
GitLab (GTLB)
Market Cap: $4.80 billion
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Is GTLB a Good Business?
- Annual revenue growth of 27.1% over the last two years was superb and indicates its market share is rising
- ARR growth averaged 24.9% over the last year, showing customers are willing to take multi-year bets on its software
- Superior software functionality and low servicing costs are reflected in its best-in-class gross margin of 86.8%
GitLab’s stock price of $28.22 implies a valuation ratio of 4x forward price-to-sales. Is now the right time to buy? 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.
