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 avoid and some other investments you should consider instead.

Coursera (COUR)

Market Cap: $1.30 billion

Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.

Why Are We Cautious About COUR?

1. Customer spending has dipped by 3.8% on average as it focused on growing its users
2. Estimated sales growth of 3.7% for the next 12 months implies demand will slow from its three-year trend
3. Excessive marketing spend signals little organic demand and traction for its platform

At $8.20 per share, Coursera trades at 24.5x forward EV-to-EBITDA. To fully understand why you should be careful with COUR, check out our full research report (it’s free).

1-800-FLOWERS (FLWS)

Market Cap: $462.4 million

Founded in 1976, 1-800-FLOWERS (NASDAQ: FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

Why Do We Avoid FLWS?

1. Annual sales declines of 9.7% for the past two years show its products and services struggled to connect with the market
2. Earnings per share fell by 17.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

1-800-FLOWERS is trading at $7.64 per share, or 23.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why FLWS doesn’t pass our bar.

UFP Industries (UFPI)

Market Cap: $6.61 billion

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ: UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Why Does UFPI Fall Short?

1. Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable

UFP Industries’s stock price of $108.34 implies a valuation ratio of 14.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than UFPI.

Stocks We Like More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.