1 Small-Cap Stock with Solid Fundamentals and 2 We Turn Down

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.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. 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:

8x8 (EGHT)

Market Cap: $237.1 million

Named after its founding year (1987) with "8x8" representing binary code for communications, 8x8 (NASDAQ:EGHT) provides cloud-based contact center and unified communications solutions that enable businesses to manage customer interactions and internal communications through a single platform.

Why Do We Think EGHT Will Underperform?

1. Customers had second thoughts about committing to its platform over the last year as its billings plateaued
2. Estimated sales for the next 12 months are flat and imply a softer demand environment
3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

At $1.71 per share, 8x8 trades at 0.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than EGHT.

Driven Brands (DRVN)

Market Cap: $2.52 billion

With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.

Why Is DRVN Not Exciting?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up

Driven Brands is trading at $15.30 per share, or 12x forward P/E. Check out our free in-depth research report to learn more about why DRVN doesn’t pass our bar.

One Small-Cap Stock to Watch:

Northwest Pipe (NWPX)

Market Cap: $635.7 million

Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.

Why Could NWPX Be a Winner?

1. Impressive 12.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Share buybacks catapulted its annual earnings per share growth to 19.9%, which outperformed its revenue gains over the last two years
3. Free cash flow margin grew by 13.7 percentage points over the last five years, giving the company more chips to play with

Northwest Pipe’s stock price of $66.27 implies a valuation ratio of 17.9x forward P/E. Is now the time to initiate a position? 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 6 Stocks for this week. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.