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. Keeping that in mind, here are two small-cap stocks that could amplify your portfolio’s returns and one that could be down big.
One Small-Cap Stock to Sell:
KB Home (KBH)
Market Cap: $3.91 billion
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Think KBH Will Underperform?
- Backlog has dropped by 20.4% on average over the past two years, suggesting it’s losing orders as competition picks up
- Earnings per share have dipped by 3.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $60.50 per share, KB Home trades at 10.5x forward P/E. Check out our free in-depth research report to learn more about why KBH doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Globalstar (GSAT)
Market Cap: $8.01 billion
Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ: GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.
Why Do We Like GSAT?
- Market share has increased this cycle as its 15.6% annual revenue growth over the last five years was exceptional
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Strong free cash flow margin of 32.9% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
Globalstar’s stock price of $63.30 implies a valuation ratio of 53.7x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Barrett (BBSI)
Market Cap: $901.2 million
Operating as a professional employer organization (PEO) that serves over 8,000 companies with more than 120,000 worksite employees, Barrett Business Services (NASDAQ: BBSI) provides management solutions that help small and mid-sized businesses handle human resources, payroll, workers' compensation, and other administrative functions.
Why Could BBSI Be a Winner?
- 7.2% annual revenue growth over the last two years surpassed the sector average as its services resonated with customers
- Share repurchases over the last five years enabled its annual earnings per share growth of 10.9% to outpace its revenue gains
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Barrett is trading at $35.15 per share, or 15.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
