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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 amplify your portfolio’s returns and two that could be down big.

Two Small-Cap Stocks to Sell:

Accel Entertainment (ACEL)

Market Cap: $979.3 million

Established in Illinois, Accel Entertainment (NYSE:ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.

Why Does ACEL Fall Short?

1. Demand for its offerings was relatively low as its number of video gaming terminals sold has underwhelmed

2. Estimated sales growth of 5.7% for the next 12 months implies demand will slow from its two-year trend

3. Low free cash flow margin of 4.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Accel Entertainment is trading at $11.57 per share, or 12.5x forward P/E. To fully understand why you should be careful with ACEL, check out our full research report (it’s free).

CRA (CRAI)

Market Cap: $1.21 billion

Often retained for high-stakes matters with multibillion-dollar implications, CRA International (NASDAQ:CRAI) provides economic, financial, and management consulting services to corporations, law firms, and government agencies for litigation, regulatory proceedings, and business strategy.

Why Does CRAI Worry Us?

1. Revenue base of $697.5 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale

2. Free cash flow margin dropped by 11 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $178.10 per share, CRA trades at 22.2x forward P/E. Read our free research report to see why you should think twice about including CRAI in your portfolio, it’s free.

One Small-Cap Stock to Watch:

Transcat (TRNS)

Market Cap: $715.6 million

Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ:TRNS) provides measurement instruments and supplies.

Why Is TRNS on Our Radar?

1. 10.1% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers

2. Forecasted revenue growth of 10.6% for the next 12 months indicates its momentum over the last two years is sustainable

3. Earnings per share have massively outperformed its peers over the last five years, increasing by 17.1% annually