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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 may have trouble.

Two Small-Cap Stocks to Sell:

Bloomin' Brands (BLMN)

Market Cap: $699.8 million

Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ:BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.

Why Do We Avoid BLMN?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand

2. Projected sales decline of 9.3% for the next 12 months points to an even tougher demand environment ahead

3. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 3.3 percentage points

Bloomin' Brands is trading at $8.44 per share, or 4.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than BLMN .

Shoals (SHLS)

Market Cap: $501 million

Started in Huntsville, Alabama, Shoals (NASDAQ:SHLS) designs and manufactures products that make solar energy systems work more efficiently.

Why Does SHLS Give Us Pause?

1. New orders were hard to come by as its backlog was flat over the past two years

2. Free cash flow margin dropped by 10.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up

3. Waning returns on capital imply its previous profit engines are losing steam

At $3.04 per share, Shoals trades at 6.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why SHLS doesn’t pass our bar .

One Small-Cap Stock to Watch:

Construction Partners (ROAD)

Market Cap: $3.78 billion

Founded in 2001, Construction Partners (NASDAQ:ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.

Why Are We Fans of ROAD?

1. Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 9.3% over the past two years

2. Exciting sales outlook for the upcoming 12 months calls for 41.6% growth, an acceleration from its two-year trend

3. Earnings per share grew by 100% annually over the last two years, massively outpacing its peers