1 Small-Cap Stock with Solid Fundamentals and 2 Facing Headwinds

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 be the next big thing and two that could be down big.

Two Small-Cap Stocks to Sell:

Scholastic (SCHL)

Market Cap: $866.5 million

Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ:SCHL) is an international company specializing in children's publishing, education, and media services.

Why Should You Sell SCHL?

1. Lackluster 4.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $33.91 per share, Scholastic trades at 24.5x forward P/E. If you’re considering SCHL for your portfolio, see our FREE research report to learn more.

Rush Enterprises (RUSHA)

Market Cap: $5.44 billion

Headquartered in Texas, Rush Enterprises (NASDAQ:RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.

Why Should You Dump RUSHA?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Sales are projected to tank by 5.6% over the next 12 months as demand evaporates further
3. Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 12% annually

Rush Enterprises’s stock price of $72.24 implies a valuation ratio of 20.6x forward P/E. Read our free research report to see why you should think twice about including RUSHA in your portfolio.

One Small-Cap Stock to Watch:

Commvault (CVLT)

Market Cap: $3.58 billion

Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ:CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.

Why Could CVLT Be a Winner?

1. Average billings growth of 26.6% over the last year enhances its liquidity and shows there is steady demand for its products
2. Software is difficult to replicate at scale and leads to a premier gross margin of 81.4%
3. Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently

Commvault is trading at $81.42 per share, or 2.9x forward price-to-sales. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.