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 swipe left on and some alternatives you should look into instead.
SoundHound AI (SOUN)
Market Cap: $3.64 billion
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ: SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Are We Cautious About SOUN?
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 40.6%, one of the worst among software companies
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Cash burn makes us question whether it can achieve sustainable long-term growth
At $8.37 per share, SoundHound AI trades at 14.7x forward price-to-sales. To fully understand why you should be careful with SOUN, check out our full research report (it’s free).
Supernus Pharmaceuticals (SUPN)
Market Cap: $2.87 billion
With a diverse portfolio of eight FDA-approved medications targeting neurological conditions, Supernus Pharmaceuticals (NASDAQ: SUPN) develops and markets treatments for central nervous system disorders including epilepsy, ADHD, Parkinson's disease, and migraine.
Why Do We Think Twice About SUPN?
- 5.9% annual revenue growth over the last five years was slower than its healthcare peers
- Modest revenue base of $776.9 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Supernus Pharmaceuticals is trading at $49.41 per share, or 3.3x forward price-to-sales. If you’re considering SUPN for your portfolio, see our FREE research report to learn more.
Oaktree Specialty Lending (OCSL)
Market Cap: $1.07 billion
Managed by Oaktree Capital Management, one of the world's premier alternative investment firms, Oaktree Specialty Lending (NASDAQ: OCSL) is a business development company that provides customized financing solutions to mid-market companies across various industries.
Why Should You Sell OCSL?
- Annual sales declines of 13.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 18.9% annually, worse than its revenue
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 5.9% annually over the last five years
Oaktree Specialty Lending’s stock price of $12.10 implies a valuation ratio of 8.6x forward P/E. Check out our free in-depth research report to learn more about why OCSL doesn’t pass our bar.
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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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
