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.

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 that may have trouble.

Two Small-Cap Stocks to Sell:

Worthington (WOR)

Market Cap: $2.02 billion

Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.

Why Are We Out on WOR?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 19.7% annually over the last five years

2. Earnings per share have contracted by 25.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Worthington is trading at $40.34 per share, or 8.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why WOR doesn’t pass our bar .

FTI Consulting (FCN)

Market Cap: $5.67 billion

With roots dating back to 1982 and a name that stands for "Forensic Technologies International," FTI Consulting (NYSE:FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve financial, legal, operational, and regulatory disputes.

Why Does FCN Give Us Pause?

1. Estimated sales growth of 1.1% for the next 12 months implies demand will slow from its two-year trend

2. Efficiency has decreased over the last five years as its adjusted operating margin fell by 2.1 percentage points

3. Free cash flow margin dropped by 2.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $152.60 per share, FTI Consulting trades at 18.5x forward price-to-earnings. To fully understand why you should be careful with FCN, check out our full research report (it’s free) .

One Small-Cap Stock to Buy:

Aris Water (ARIS)

Market Cap: $923 million

Primarily serving the oil and gas industry, Aris Water (NYSE:ARIS) is a provider of water handling and recycling solutions.

Why Do We Love ARIS?

1. Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 54.9%

2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 33.6% over the last two years outstripped its revenue performance

3. Free cash flow turned positive over the last five years, showing the company has crossed a key inflection point