1 Small-Cap Stock to Consider Right Now and 2 to Turn Down

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.

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

Two Small-Cap Stocks to Sell:

Advance Auto Parts (AAP)

Market Cap: $2.90 billion

Founded in Virginia in 1932, Advance Auto Parts (NYSE:AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.

Why Should You Sell AAP?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Inability to adjust its cost structure while its revenue declined over the last year led to a 10.4 percentage point drop in the company’s operating margin
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Advance Auto Parts is trading at $48.28 per share, or 22.6x forward P/E. Dive into our free research report to see why there are better opportunities than AAP.

Trinity (TRN)

Market Cap: $2.10 billion

Operating under the trade name TrinityRail, Trinity (NYSE:TRN) is a provider of railcar products and services in North America.

Why Is TRN Not Exciting?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 1.1% annually over the last five years
2. Negative free cash flow raises questions about the return timeline for its investments
3. 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $25.74 per share, Trinity trades at 3.9x forward EV-to-EBITDA. If you’re considering TRN for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Watch:

Dutch Bros (BROS)

Market Cap: $8.85 billion

Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE:BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.

Why Is BROS on Our Radar?

1. Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
2. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
3. Expected revenue growth of 23% for the next year suggests its market share will rise

Dutch Bros’s stock price of $69.55 implies a valuation ratio of 108.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. 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.