Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three small-cap stocks to avoid and some other investments you should consider instead.
ZoomInfo (GTM)
Market Cap: $1.83 billion
Operating a platform it calls "RevOS" - short for Revenue Operating System - ZoomInfo (NASDAQ: GTM) provides sales, marketing, and recruiting teams with business intelligence and analytics to identify prospects and deliver targeted outreach.
Why Should You Dump GTM?
- Flat billings over the last year suggest it may need to improve its products, pricing, or go-to-market strategy to reinvigorate demand
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Free cash flow margin is forecasted to shrink by 4.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
ZoomInfo’s stock price of $6.15 implies a valuation ratio of 1.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GTM.
Rush Street Interactive (RSI)
Market Cap: $2.34 billion
Specializing in online casino gaming and sports betting, Rush Street Interactive (NYSE: RSI) is an operator of digital gaming platforms.
Why Do We Avoid RSI?
- Muted 28.1% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Projected 1.2 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
At $22.65 per share, Rush Street Interactive trades at 40x forward P/E. To fully understand why you should be careful with RSI, check out our full research report (it’s free).
Offerpad (OPAD)
Market Cap: $41.15 million
Known for giving homeowners cash offers within 24 hours, Offerpad (NYSE: OPAD) operates a tech-enabled platform specializing in direct home buying and selling solutions.
Why Are We Out on OPAD?
- Demand for its offerings was relatively low as its number of homes sold has underwhelmed
- Projected 16.2 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- Negative earnings profile makes it challenging to secure favorable financing terms from lenders
Offerpad is trading at $0.87 per share, or 0.1x forward price-to-sales. If you’re considering OPAD for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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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.
