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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
RingCentral (RNG)
Market Cap: $2.43 billion
Built on its proprietary Message Video Phone (MVP) platform that unifies multiple communication methods, RingCentral (NYSE: RNG) provides AI-driven cloud communications and collaboration solutions that enable businesses to connect through voice, video, messaging, and contact center services.
Why Is RNG Risky?
- Offerings struggled to generate meaningful interest as its average billings growth of 5% over the last year did not impress
- Estimated sales growth of 5.1% for the next 12 months implies demand will slow from its two-year trend
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
RingCentral is trading at $26.86 per share, or 1x forward price-to-sales. Read our free research report to see why you should think twice about including RNG in your portfolio.
Shoe Carnival (SCVL)
Market Cap: $535.7 million
Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ: SCVL) is a retailer that sells footwear from mainstream brands for the entire family.
Why Are We Out on SCVL?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Smaller revenue base of $1.15 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- 6 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
At $19.57 per share, Shoe Carnival trades at 12.4x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SCVL.
Bloomin' Brands (BLMN)
Market Cap: $617.6 million
Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ: BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Should You Sell BLMN?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales decline of 2.4% for the next 12 months implies an even more challenging demand environment
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Bloomin' Brands’s stock price of $7.25 implies a valuation ratio of 6.8x forward P/E. Check out our free in-depth research report to learn more about why BLMN doesn’t pass our bar.
Stocks We Like More
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Take advantage of the rebound by checking out our 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-small-cap company Comfort Systems (+782% 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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