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.

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. That said, here is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.

Two Small-Cap Stocks to Sell:

Amplitude (AMPL)

Market Cap: $1.58 billion

Born out of a failed voice recognition startup by founder Spenser Skates, Amplitude (NASDAQ:AMPL) is data analytics software helping companies improve and optimize their digital products.

Why Are We Hesitant About AMPL?

1. Offerings struggled to generate meaningful interest as its average billings growth of 6.4% over the last year did not impress
2. Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 97.8% net revenue retention rate
3. Persistent operating losses suggest the business manages its expenses poorly

Amplitude’s stock price of $12.50 implies a valuation ratio of 4.7x forward price-to-sales. Check out our free in-depth research report to learn more about why AMPL doesn’t pass our bar.

Lindblad Expeditions (LIND)

Market Cap: $575.3 million

Founded by explorer Sven-Olof Lindblad in 1979, Lindblad Expeditions (NASDAQ:LIND) offers cruising experiences to remote destinations in partnership with National Geographic.

Why Is LIND Risky?

1. Sales trends were unexciting over the last five years as its 13.4% annual growth was below the typical consumer discretionary company
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 30.1% annually
3. Projected 4 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position

Lindblad Expeditions is trading at $10.86 per share, or 5.2x forward EV-to-EBITDA. To fully understand why you should be careful with LIND, check out our full research report (it’s free).

One Small-Cap Stock to Watch:

Enphase (ENPH)

Market Cap: $7.78 billion

The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ:ENPH) manufactures software-driven home energy products.

Why Are We Fans of ENPH?

1. Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 15.1%
2. ENPH is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
3. ROIC punches in at 42.7%, illustrating management’s expertise in identifying profitable investments

At $58.72 per share, Enphase trades at 16.5x forward price-to-earnings. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.