Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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.

Pangaea (PANL)

Market Cap: $277 million

Established in 1996, Pangaea Logistics (NASDAQ: PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.

Why Do We Pass on PANL?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 12.4% annually over the last two years
2. Earnings per share decreased by more than its revenue over the last two years, partly because it diluted shareholders
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.4 percentage points

Pangaea is trading at $4.22 per share, or 4x forward price-to-earnings. Read our free research report to see why you should think twice about including PANL in your portfolio.

Trex (TREX)

Market Cap: $6.19 billion

Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.

Why Does TREX Worry Us?

1. Muted 2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Free cash flow margin dropped by 9.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Trex’s stock price of $57.73 implies a valuation ratio of 26.3x forward price-to-earnings. Check out our free in-depth research report to learn more about why TREX doesn’t pass our bar.

Hyatt Hotels (H)

Market Cap: $10.76 billion

Founded in 1957, Hyatt Hotels (NYSE: H) is a global hospitality company with a portfolio of 20 premier brands and over 950 properties across 65 countries.

Why Are We Out on H?

1. Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
2. Estimated sales growth of 2.6% for the next 12 months implies demand will slow from its two-year trend
3. Negative returns on capital show that some of its growth strategies have backfired

At $112.78 per share, Hyatt Hotels trades at 29.9x forward price-to-earnings. To fully understand why you should be careful with H, check out our full research report (it’s free).

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.