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.
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 is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
Malibu Boats (MBUU)
Market Cap: $511.2 million
Founded in California in 1982, Malibu Boats (NASDAQ:MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Are We Out on MBUU?
- Demand for its offerings was relatively low as its number of boats sold has underwhelmed
- Poor free cash flow margin of 6.2% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $26.60 per share, Malibu Boats trades at 18.5x forward P/E. Read our free research report to see why you should think twice about including MBUU in your portfolio.
Synovus Financial (SNV)
Market Cap: $6.52 billion
Tracing its roots back to 1888 when a worker accidentally dropped a textile mill payroll into the dust, prompting the need for better banking, Synovus Financial (NYSE:SNV) is a regional financial services company that provides commercial and consumer banking, wealth management, and specialized lending services across five southeastern states.
Why Does SNV Fall Short?
- 3.9% annual net interest income growth over the last five years was slower than its banking peers
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.5%
- Earnings per share lagged its peers over the last two years as they only grew by 8.3% annually
Synovus Financial is trading at $47.01 per share, or 1.2x forward P/B. If you’re considering SNV for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
CarGurus (CARG)
Market Cap: $3.30 billion
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ:CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Could CARG Be a Winner?
- Monetization efforts are paying off as its average revenue per user has grown by 11.3% annually over the last two years
- Highly efficient business model is illustrated by its impressive 29.2% EBITDA margin, and its rise over the last few years shows it refined its expense structure
- Free cash flow margin grew by 20.9 percentage points over the last few years, giving the company more chips to play with
CarGurus’s stock price of $34.61 implies a valuation ratio of 9.9x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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