Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. 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:
Lamb Weston (LW)
Market Cap: $8.67 billion
Best known for its Grown in Idaho brand, Lamb Weston (NYSE: LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Does LW Give Us Pause?
- Sales are projected to remain flat over the next 12 months as demand decelerates from its three-year trend
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 23.9% that must be offset through higher volumes
- Efficiency has decreased over the last year as its operating margin fell by 5.3 percentage points
Lamb Weston’s stock price of $62.02 implies a valuation ratio of 19.7x forward P/E. To fully understand why you should be careful with LW, check out our full research report (it’s free for active Edge members).
Integral Ad Science (IAS)
Market Cap: $1.71 billion
Processing over 280 billion digital ad interactions daily through its AI-powered technology, Integral Ad Science (NASDAQ: IAS) provides a cloud-based platform that measures and verifies digital advertising across devices, channels, and formats to ensure ads are viewable, fraud-free, and brand-safe.
Why Do We Think Twice About IAS?
- Annual revenue growth of 14% over the last two years was below our standards for the software sector
- Operating margin expanded by 5.6 percentage points over the last year as it scaled and became more efficient
- Free cash flow margin is forecasted to shrink by 7.9 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Integral Ad Science is trading at $10.25 per share, or 2.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than IAS.
One Small-Cap Stock to Watch:
Freshworks (FRSH)
Market Cap: $3.19 billion
Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.
Why Does FRSH Stand Out?
- Market share has increased as its 30.5% annual revenue growth over the last five years was exceptional
- ARR growth averaged 20.9% over the last year, showing customers are willing to take multi-year bets on its software
- Superior software functionality and low servicing costs result in a top-tier gross margin of 84.6%
At $11.18 per share, Freshworks trades at 3.7x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. 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-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
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