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. 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:
Impinj (PI)
Market Cap: $5.14 billion
Founded by Caltech professor Carver Mead and one of his students Chris Diorio, Impinj (NASDAQ:PI) is a maker of radio-frequency identification (RFID) hardware and software.
Why Does PI Worry Us?
- Products and services resonate with customers, evidenced by its respectable 8.6% annualized sales growth over the last two years
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Negative returns on capital show that some of its growth strategies have backfired
Impinj’s stock price of $168.27 implies a valuation ratio of 70.7x forward P/E. Check out our free in-depth research report to learn more about why PI doesn’t pass our bar.
Lumen (LUMN)
Market Cap: $6.58 billion
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Why Do We Pass on LUMN?
- Annual sales declines of 10.2% for the past five years show its products and services struggled to connect with the market during this cycle
- Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its adjusted operating margin
- Sales were less profitable over the last five years as its earnings per share fell by 18% annually, worse than its revenue declines
Lumen is trading at $6.36 per share, or 5.6x forward EV-to-EBITDA. To fully understand why you should be careful with LUMN, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Viper Energy (VNOM)
Market Cap: $8.82 billion
Operating a business model that requires no drilling rigs or production equipment of its own, Viper Energy (NASDAQ:VNOM) owns mineral and royalty interests in oil and gas properties, collecting revenue when operators extract resources from land.
Why Will VNOM Beat the Market?
- Impressive 40.1% annual revenue growth over the last ten years indicates it’s winning market share this cycle
- Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 100%
- EBITDA profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
At $45.40 per share, Viper Energy trades at 17.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.