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.
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 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:
MGP Ingredients (MGPI)
Market Cap: $394.5 million
Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry
Why Should You Sell MGPI?
- Sales tumbled by 12.9% annually over the last three years, showing consumer trends are working against it
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
- Earnings per share have contracted by 17.4% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
MGP Ingredients’s stock price of $18.46 implies a valuation ratio of 10x forward P/E. Check out our free in-depth research report to learn more about why MGPI doesn’t pass our bar.
Kimball Electronics (KE)
Market Cap: $637.1 million
Founded in 1961, Kimball Electronics (NASDAQ: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Why Is KE Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.1% annually over the last two years
- Earnings per share have dipped by 6.4% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Negative free cash flow raises questions about the return timeline for its investments
At $26.48 per share, Kimball Electronics trades at 19.6x forward P/E. If you’re considering KE for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Patterson-UTI (PTEN)
Market Cap: $4.29 billion
Operating 135 Tier-1 super-spec rigs that can handle the industry's most demanding drilling projects, Patterson-UTI (NASDAQ: PTEN) provides contract drilling rigs, hydraulic fracturing, and drill bits to oil and gas operators.
Why Does PTEN Stand Out?
- Market share has increased this cycle as its 12.5% annual revenue growth over the last ten years was exceptional
- Economies of scale give it some operating leverage when demand rises
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
Patterson-UTI is trading at $11.23 per share, or 5.9x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
