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 are two small-cap stocks that could amplify your portfolio’s returns and one best left ignored.
One Small-Cap Stock to Sell:
Dine Brands (DIN)
Market Cap: $355.6 million
Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Is DIN Risky?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Efficiency has decreased over the last year as its operating margin fell by 4.3 percentage points
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Dine Brands is trading at $27.02 per share, or 5.9x forward P/E. Read our free research report to see why you should think twice about including DIN in your portfolio.
Two Small-Cap Stocks to Watch:
Brady (BRC)
Market Cap: $3.92 billion
Founded in 1914 and evolving through more than a century of industrial innovation, Brady (NYSE: BRC) manufactures and supplies identification solutions and workplace safety products that help companies identify and protect their premises, products, and people.
Why Will BRC Beat the Market?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 8.3% annual sales growth over the last two years
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Robust free cash flow margin of 10.9% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $82.90 per share, Brady trades at 15.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Cohen & Steers (CNS)
Market Cap: $3.26 billion
Founded in 1986 as a pioneer in real estate investment trusts (REITs), Cohen & Steers (NYSE: CNS) is an investment manager specializing in real estate securities, infrastructure, real assets, and preferred securities for institutional and individual investors.
Why Do We Watch CNS?
- Impressive 20.1% annual tangible book value per share growth over the last two years indicates it’s building equity value this cycle
- Industry-leading 40.4% return on equity demonstrates management’s skill in finding high-return investments
Cohen & Steers’s stock price of $63.49 implies a valuation ratio of 18.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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.
