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. Keeping that in mind, here are three small-cap stocks to pass on and some alternatives you should look into instead.

Chewy (CHWY)

Market Cap: $9.40 billion

Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.

Why Does CHWY Worry Us?

1. Annual sales growth of 7.1% over the last three years lagged behind its consumer internet peers as its large revenue base made it difficult to generate incremental demand
2. Estimated sales growth of 6.8% for the next 12 months is soft and implies weaker demand
3. Gross margin of 29.6% reflects its high servicing costs

Chewy is trading at $23.17 per share, or 10x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than CHWY.

Schneider (SNDR)

Market Cap: $6.12 billion

Employing thousands of drivers across the country to make deliveries, Schneider (NYSE: SNDR) makes full truckload and intermodal deliveries regionally and across borders.

Why Do We Pass on SNDR?

1. Muted 3.1% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.6% annually
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $35.25 per share, Schneider trades at 26.4x forward P/E. To fully understand why you should be careful with SNDR, check out our full research report (it’s free).

Amentum (AMTM)

Market Cap: $5.66 billion

With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE: AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.

Why Do We Think Twice About AMTM?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 1.1% for the last four years
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.5%
3. Low free cash flow margin of 2.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Amentum’s stock price of $23.09 implies a valuation ratio of 8.8x forward P/E. If you’re considering AMTM for your portfolio, see our FREE research report to learn more.

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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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.