1 Small-Cap Stock to Consider Right Now and 2 Facing Challenges

Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.

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:

Fortune Brands (FBIN)

Market Cap: $6.24 billion

Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE:FBIN) makes plumbing, security, and outdoor living products.

Why Are We Out on FBIN?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Sales over the last two years were less profitable as its earnings per share fell by 9.5% annually while its revenue was flat
3. Free cash flow margin dropped by 6.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Fortune Brands’s stock price of $53.05 implies a valuation ratio of 12.8x forward P/E. Check out our free in-depth research report to learn more about why FBIN doesn’t pass our bar.

Meritage Homes (MTH)

Market Cap: $4.90 billion

Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.

Why Should You Dump MTH?

1. Backlog has dropped by 36.5% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.6 percentage points
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $68.50 per share, Meritage Homes trades at 9.2x forward P/E. Dive into our free research report to see why there are better opportunities than MTH.

One Small-Cap Stock to Watch:

Euronet Worldwide (EEFT)

Market Cap: $3.43 billion

Operating a global network of over 47,000 ATMs and 821,000 point-of-sale terminals across more than 60 countries, Euronet Worldwide (NASDAQ:EEFT) provides electronic payment solutions including ATM services, prepaid product processing, and international money transfer services.

Why Do We Like EEFT?

1. Decent 9.8% annual revenue growth over the last five years beat most of its peers, showing customers find value in its products and services
2. Share repurchases over the last five years enabled its annual earnings per share growth of 21% to outpace its revenue gains
3. Industry-leading 18.2% return on equity demonstrates management’s skill in finding high-return investments

Euronet Worldwide is trading at $86.77 per share, or 8.2x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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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