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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
C3.ai (AI)
Market Cap: $2.67 billion
Named after the three Cs of its original focus—carbon, cloud computing, and customer relationship management—C3.ai (NYSE: AI) provides enterprise AI software that helps organizations develop, deploy, and operate large-scale artificial intelligence applications across various industries.
Why Should You Dump AI?
- Average billings growth of 12.4% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 56.6%, one of the worst among software companies
- Negative free cash flow raises questions about the return timeline for its investments
C3.ai is trading at $19.35 per share, or 8.5x forward price-to-sales. If you’re considering AI for your portfolio, see our FREE research report to learn more.
ArcBest (ARCB)
Market Cap: $1.62 billion
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Should You Sell ARCB?
- Flat unit sales over the past two years imply it may need to invest in improvements to get back on track
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
ArcBest’s stock price of $70.44 implies a valuation ratio of 14.1x forward P/E. To fully understand why you should be careful with ARCB, check out our full research report (it’s free for active Edge members).
Ziff Davis (ZD)
Market Cap: $1.47 billion
Originally a pioneering technology publisher founded in 1927 that became famous for PC Magazine, Ziff Davis (NASDAQ: ZD) operates a portfolio of digital media brands and subscription services across technology, shopping, gaming, healthcare, and cybersecurity markets.
Why Do We Avoid ZD?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Earnings per share fell by 2% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15.2 percentage points
At $35.33 per share, Ziff Davis trades at 5x forward P/E. Read our free research report to see why you should think twice about including ZD in your portfolio.
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 Kadant (+351% 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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