2 Small-Cap Stocks on Our Watchlist and 1 We Avoid

Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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 are two small-cap stocks that could amplify your portfolio’s returns and one best left ignored.

One Small-Cap Stock to Sell:

Central Garden & Pet (CENT)

Market Cap: $2.16 billion

Enhancing the lives of both pets and homeowners, Central Garden & Pet (NASDAQ:CENT) is a leading producer and distributor of essential products for pet care, lawn and garden maintenance, and pest control.

Why Should You Sell CENT?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.1%
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Central Garden & Pet is trading at $38 per share, or 13.3x forward P/E. Check out our free in-depth research report to learn more about why CENT doesn’t pass our bar.

Two Small-Cap Stocks to Watch:

Yelp (YELP)

Market Cap: $1.29 billion

Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE:YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.

Why Could YELP Be a Winner?

1. Prominent and differentiated platform results in a best-in-class gross margin of 90.7%
2. Healthy EBITDA margin of 25.3% shows it’s a well-run company with efficient processes, and its rise over the last few years was fueled by some leverage on its fixed costs
3. Share buybacks catapulted its annual earnings per share growth to 29.9%, which outperformed its revenue gains over the last three years

At $20.95 per share, Yelp trades at 3.5x forward EV/EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

BrightSpring Health Services (BTSG)

Market Cap: $8.02 billion

Founded in 1974, BrightSpring Health Services (NASDAQ:BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.

Why Is BTSG Interesting?

1. Annual revenue growth of 21.4% over the last two years was superb and indicates its market share increased during this cycle
2. Estimated revenue growth of 13.9% for the next 12 months implies its momentum over the last two years will continue
3. Earnings per share grew by 15.7% annually over the last four years and trumped its peers

BrightSpring Health Services’s stock price of $38.69 implies a valuation ratio of 30.9x 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

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out 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.