1 Small-Cap Stock with Competitive Advantages and 2 Facing Headwinds

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 be the next big thing and two that may have trouble.

Two Small-Cap Stocks to Sell:

OneWater (ONEW)

Market Cap: $213.5 million

A public company since early 2020, OneWater Marine (NASDAQ:ONEW) sells boats, yachts, and other marine products.

Why Do We Avoid ONEW?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Earnings per share fell by 66.6% annually over the last three years while its revenue grew, partly because it diluted shareholders
3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

OneWater’s stock price of $12.91 implies a valuation ratio of 21.5x forward P/E. Dive into our free research report to see why there are better opportunities than ONEW.

Sealed Air (SEE)

Market Cap: $6.11 billion

Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.

Why Are We Out on SEE?

1. Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Sales are projected to be flat over the next 12 months and imply weak demand
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Sealed Air is trading at $41.56 per share, or 12.8x forward P/E. Check out our free in-depth research report to learn more about why SEE doesn’t pass our bar.

One Small-Cap Stock to Watch:

Shake Shack (SHAK)

Market Cap: $3.70 billion

Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE:SHAK) is a fast-food restaurant known for its burgers and milkshakes.

Why Do We Watch SHAK?

1. Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
2. Same-store sales growth averaged 3% over the past two years, showing it’s bringing new and repeat diners into its restaurants
3. Operating margin expanded by 4.6 percentage points over the last year as it scaled and became more efficient

At $92.28 per share, Shake Shack trades at 59.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.