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.
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.
Zevia (ZVIA)
Market Cap: $100.3 million
With a primary focus on soda but also a presence in energy drinks and teas, Zevia (NYSE:ZVIA) is a better-for-you beverage company.
Why Does ZVIA Give Us Pause?
- Flat sales over the last three years suggest it must innovate and find new ways to grow
- Modest revenue base of $169.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Historical operating margin losses point to an inefficient cost structure
Zevia’s stock price of $1.38 implies a valuation ratio of 0.5x forward price-to-sales. Read our free research report to see why you should think twice about including ZVIA in your portfolio.
Primoris (PRIM)
Market Cap: $4.12 billion
Listed on the NASDAQ in 2008, Primoris (NYSE:PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Is PRIM Not Exciting?
- Gross margin of 10.3% reflects its high production costs
- Earnings per share have dipped by 1.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.2% for the last five years
At $76.62 per share, Primoris trades at 19.4x forward P/E. To fully understand why you should be careful with PRIM, check out our full research report (it’s free).
Amphastar Pharmaceuticals (AMPH)
Market Cap: $1.01 billion
Founded in 1996 and known for its expertise in complex drug formulations, Amphastar Pharmaceuticals (NASDAQ:AMPH) develops and manufactures technically challenging injectable and inhalation medications, including both generic and proprietary pharmaceutical products.
Why Do We Think Twice About AMPH?
- 1.2% annual revenue growth over the last two years was slower than its healthcare peers
- Smaller revenue base of $730 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 12.7 percentage points
Amphastar Pharmaceuticals is trading at $23.82 per share, or 7.5x forward P/E. Read our free research report to see why you should think twice about including AMPH in your portfolio.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.