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 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:
Privia Health (PRVA)
Market cap: $3.06 billion
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ: PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Does PRVA Give Us Pause?
- Revenue base of $2.43 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.1% for the last five years
- Negative returns on capital show management lost money while trying to expand the business
Privia Health’s stock price of $23.93 implies a valuation ratio of 18.8x forward P/E. Read our free research report to see why you should think twice about including PRVA in your portfolio.
Pelagos Insurance (PLGO)
Market cap: $2.31 billion
Founded in Bermuda in 2014 and designed to adapt nimbly to evolving market conditions, Pelagos Insurance (NYSE: PLGO) is a global specialty insurance and reinsurance company focused on creating value through strategic capital allocation, expert risk selection and a network of long-term underwriting partnerships.
Why Is PLGO Not Exciting?
- Net premiums earned expanded by 7.1% annually over the last two years, falling below our expectations for the insurance sector
- Annual earnings per share growth of 6.2% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Annual book value per share growth of 10.9% over the last two years was below our standards for the insurance sector
At $27.91 per share, Pelagos Insurance trades at 1x forward P/B. To fully understand why you should be careful with PLGO, check out our full research report (it’s free).
One small-cap stock to watch:
Belden (BDC)
Market cap: $3.76 billion
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.
Why Are We Fans of BDC?
- Annual revenue growth of 15.6% over the past two years was outstanding, reflecting market share gains this cycle
- Market share is on track to rise over the next 12 months as its 25.9% projected revenue growth implies demand will accelerate from its two-year trend
- Share buybacks catapulted its annual earnings per share growth to 19.6%, which outperformed its revenue gains over the last two years
Belden is trading at $95.48 per share, or 11x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-quality stocks for all market conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
