1 Small-Cap Stock for Long-Term Investors and 2 We Turn Down

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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.

Two Small-Cap Stocks to Sell:

THOR Industries (THO)

Market Cap: $4.22 billion

Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.

Why Do We Think THO Will Underperform?

1. Sales tumbled by 2.2% annually over the last two years, showing market trends are working against it during this cycle
2. Earnings per share fell by 4.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Waning returns on capital imply its previous profit engines are losing steam

THOR Industries’s stock price of $80.37 implies a valuation ratio of 17.9x forward P/E. Read our free research report to see why you should think twice about including THO in your portfolio.

LGI Homes (LGIH)

Market Cap: $1.13 billion

Based in Texas, LGI Homes (NASDAQ:LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.

Why Do We Pass on LGIH?

1. Annual sales declines of 8.6% for the past five years show its products and services struggled to connect with the market during this cycle
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $49 per share, LGI Homes trades at 14.5x forward P/E. To fully understand why you should be careful with LGIH, check out our full research report (it’s free).

One Small-Cap Stock to Buy:

Gorman-Rupp (GRC)

Market Cap: $1.98 billion

Powering fluid dynamics since 1934, Gorman-Rupp (NYSE:GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.

Why Is GRC a Good Business?

1. Annual revenue growth of 14.9% over the past five years was outstanding, reflecting market share gains this cycle
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 30% outpaced its revenue gains
3. Free cash flow margin grew by 6.2 percentage points over the last five years, giving the company more chips to play with

Gorman-Rupp is trading at $74.88 per share, or 2.9x trailing 12-month price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.