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.
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 are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.
One Small-Cap Stock to Sell:
Pool (POOL)
Market Cap: $7.37 billion
Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ: POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.
Why Do We Pass on POOL?
- 4.4% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Low free cash flow margin of 7.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $204.53 per share, Pool trades at 18.7x forward P/E. To fully understand why you should be careful with POOL, check out our full research report (it’s free).
Two Small-Cap Stocks to Watch:
WisdomTree (WT)
Market Cap: $3.00 billion
Originally founded as a financial media company before pivoting to ETF management in 2006, WisdomTree (NYSE: WT) is a financial services company that creates and manages exchange-traded funds (ETFs) and other investment products for individual and institutional investors.
Why Will WT Outperform?
- Annual revenue growth of 22.5% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROE punches in at 15.2%, illustrating management’s expertise in identifying profitable investments
WisdomTree is trading at $20.40 per share, or 16.8x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
PJT (PJT)
Market Cap: $4.35 billion
Spun off from Blackstone in 2015 and founded by former Morgan Stanley executive Paul J. Taubman, PJT Partners (NYSE: PJT) is an advisory-focused investment bank that provides strategic advice, restructuring services, and fundraising solutions to corporations, boards, and investment firms.
Why Do We Watch PJT?
- Annual revenue growth of 18.7% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 42% annual growth in its earnings per share outpaced its revenue
- ROE punches in at 27.5%, illustrating management’s expertise in identifying profitable investments
PJT’s stock price of $168.54 implies a valuation ratio of 21.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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.
