Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Under Armour (UAA)
Market Cap: $2.16 billion
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Is UAA Risky?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Sales are projected to tank by 2.7% over the next 12 months as its demand continues evaporating
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Under Armour is trading at $5.07 per share, or 16.2x forward P/E. Check out our free in-depth research report to learn more about why UAA doesn’t pass our bar.
Champion Homes (SKY)
Market Cap: $4.24 billion
Founded in 1951, Champion Homes (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.
Why Do We Think Twice About SKY?
- Sales trends were unexciting over the last two years as its 4.4% annual growth was below the typical industrials company
- Earnings per share fell by 19.2% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $74.98 per share, Champion Homes trades at 22.3x forward P/E. To fully understand why you should be careful with SKY, check out our full research report (it’s free).
Applied Digital (APLD)
Market Cap: $4.18 billion
Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital (NASDAQ: APLD) designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.
Why Does APLD Give Us Pause?
- Issuance of new shares over the last two years caused its earnings per share to fall by 78.9% annually while its revenue grew
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Applied Digital’s stock price of $15.96 implies a valuation ratio of 39.9x forward EV-to-EBITDA. If you’re considering APLD for your portfolio, see our FREE research report to learn more.
Stocks We Like More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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