1 Small-Cap Stock with Impressive Fundamentals and 2 Facing Challenges
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.
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 be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Medifast (MED)
Market Cap: $120.7 million
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE:MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Why Do We Pass on MED?
- Products have few die-hard fans as sales have declined by 38.7% annually over the last three years
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
- Earnings per share have contracted by 29.9% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Medifast’s stock price of $11.74 implies a valuation ratio of 0.5x forward price-to-sales. Read our free research report to see why you should think twice about including MED in your portfolio.
AdaptHealth (AHCO)
Market Cap: $844.5 million
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ:AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Do We Avoid AHCO?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.7% annually over the last two years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- ROIC of -1% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
AdaptHealth is trading at $6.29 per share, or 5.4x forward EV-to-EBITDA. If you’re considering AHCO for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
CSW (CSW)
Market Cap: $4.79 billion
With over two centuries of combined operations manufacturing and supplying, CSW (NYSE:CSW) offers special chemicals, coatings, sealants, and lubricants for various industries.
Why Is CSW a Good Business?
- Impressive 19.7% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Excellent operating margin of 18.4% highlights the efficiency of its business model
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 27.1% annually
At $294.97 per share, CSW trades at 22.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.