1 Small-Cap Stock with Exciting Potential and 2 We Brush Off

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.

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 best left ignored.

Two Small-Cap Stocks to Sell:

Yelp (YELP)

Market Cap: $1.66 billion

Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE:YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.

Why Are We Cautious About YELP?

1. Muted 7.1% annual revenue growth over the last three years shows its demand lagged behind its consumer internet peers
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue

Yelp is trading at $27.94 per share, or 4.5x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than YELP.

Strategic Education (STRA)

Market Cap: $1.86 billion

Formed through the merger of Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ:STRA) is a career-focused higher education provider.

Why Do We Avoid STRA?

1. Sluggish trends in its international students suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 1.7% annually
3. Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year

Strategic Education’s stock price of $83.15 implies a valuation ratio of 11.7x forward P/E. If you’re considering STRA for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Buy:

Instacart (CART)

Market Cap: $9.80 billion

Powering more than one billion grocery orders since its founding, Instacart (NASDAQ:CART) is an online grocery shopping and delivery platform that partners with retailers to help customers shop from local stores through its app or website.

Why Is CART a Top Pick?

1. Platform is difficult to replicate at scale and results in a premier gross margin of 74.4%
2. Healthy EBITDA margin of 27.7% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
3. Free cash flow margin grew by 14.4 percentage points over the last few years, giving the company more chips to play with

At $41.40 per share, Instacart trades at 8.3x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.

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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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.