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.
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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
UiPath (PATH)
Market Cap: $6.6 billion
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE: PATH) makes software that helps companies automate repetitive computer tasks.
Why Does PATH Give Us Pause?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 5.7% underwhelmed
- Estimated sales growth of 6.4% for the next 12 months implies demand will slow from its three-year trend
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
At $12.49 per share, UiPath trades at 4.5x forward price-to-sales. Check out our free in-depth research report to learn more about why PATH doesn’t pass our bar.
The ONE Group (STKS)
Market Cap: $112.7 million
Doubling as a hospitality services provider for hotels and resorts, The One Group Hospitality (NASDAQ: STKS) is an upscale restaurant company that operates STK Steakhouse and Kona Grill.
Why Do We Pass on STKS?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Earnings per share have contracted by 17.6% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
The ONE Group is trading at $3.72 per share, or 1.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including STKS in your portfolio.
Hertz (HTZ)
Market Cap: $2.25 billion
Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Is HTZ Risky?
- Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Hertz’s stock price of $7.18 implies a valuation ratio of 6.1x forward EV-to-EBITDA. To fully understand why you should be careful with HTZ, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
