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.
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 be the next big thing and two best left ignored.
Two Small-Cap Stocks to Sell:
Brinker International (EAT)
Market Cap: $7.08 billion
Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.
Why Are We Hesitant About EAT?
- Limited expansion of restaurants suggests it’s prioritizing efficiency over growth at this stage
- Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its six-year trend
- Gross margin of 17.7% reflects the bad unit economics inherent in most restaurant businesses
Brinker International’s stock price of $162.37 implies a valuation ratio of 14.7x forward P/E. Dive into our free research report to see why there are better opportunities than EAT.
MGP Ingredients (MGPI)
Market Cap: $549.4 million
Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry
Why Is MGPI Risky?
- Annual sales declines of 8.6% for the past three years show its products struggled to connect with the market
- Forecasted revenue decline of 11.3% for the upcoming 12 months implies demand will fall even further
- Inability to adjust its cost structure while its revenue declined over the last year led to a 18.3 percentage point drop in the company’s operating margin
At $25.77 per share, MGP Ingredients trades at 11.4x forward P/E. Read our free research report to see why you should think twice about including MGPI in your portfolio.
One Small-Cap Stock to Watch:
Kirby (KEX)
Market Cap: $6.58 billion
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Does KEX Stand Out?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Share repurchases over the last two years enabled its annual earnings per share growth of 30.4% to outpace its revenue gains
- Improving returns on capital suggest its past investments are beginning to deliver value
Kirby is trading at $121.34 per share, or 18.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
