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.

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.

Couchbase (BASE)

Market Cap: $980.3 million

Formed in 2011 with the merger of Membase and CouchOne, Couchbase (NASDAQ: BASE) is a database-as-a-service platform that allows enterprises to store large volumes of semi-structured data.

Why Is BASE Not Exciting?

1. Sales trends were unexciting over the last three years as its 19.2% annual growth was below the typical software company
2. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
3. Suboptimal cost structure is highlighted by its history of operating losses

Couchbase’s stock price of $18.31 implies a valuation ratio of 4.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BASE.

Matson (MATX)

Market Cap: $3.84 billion

Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.

Why Does MATX Give Us Pause?

1. Annual sales declines of 5.3% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have contracted by 11.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $117.62 per share, Matson trades at 11.8x forward P/E. To fully understand why you should be careful with MATX, check out our full research report (it’s free).

Albany (AIN)

Market Cap: $2.06 billion

Founded in 1895, Albany (NYSE: AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.

Why Are We Out on AIN?

1. 3% annual revenue growth over the last five years was slower than its industrials peers
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 9 percentage points
3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 5.6% annually

Albany is trading at $68.29 per share, or 10.9x forward EV-to-EBITDA. If you’re considering AIN for your portfolio, see our FREE research report to learn more.

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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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.