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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Winnebago (WGO)

Market Cap: $927.9 million

Created to provide high-quality, affordable RVs to the post-war American family, Winnebago (NYSE: WGO) is a manufacturer of recreational vehicles, providing a range of motorhomes, travel trailers, and fifth-wheel products for outdoor and adventure lifestyles.

Why Should You Sell WGO?

1. Sales tumbled by 21.4% annually over the last two years, showing market trends are working against its favor during this cycle
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 28.9% annually
3. Eroding returns on capital suggest its historical profit centers are aging

At $33.08 per share, Winnebago trades at 7.5x forward P/E. Check out our free in-depth research report to learn more about why WGO doesn’t pass our bar.

Maximus (MMS)

Market Cap: $3.97 billion

With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.

Why Does MMS Fall Short?

1. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.9 percentage points
3. Underwhelming 12.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up

Maximus’s stock price of $70.43 implies a valuation ratio of 11x forward P/E. Dive into our free research report to see why there are better opportunities than MMS.

QCR Holdings (QCRH)

Market Cap: $1.13 billion

With roots dating back to 1993 and a name reflecting its original Quad Cities market, QCR Holdings (NASDAQGM:QCRH) operates four community banks across Iowa and Missouri, providing commercial, consumer banking, and trust services to businesses and individuals.

Why Are We Cautious About QCRH?

1. Annual revenue growth of 2.7% over the last two years was below our standards for the bank sector
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 29 basis points (100 basis points = 1 percentage point)
3. Low interest coverage ratio indicates the company may struggle to service its debt obligations if operational performance deteriorates

QCR Holdings is trading at $66.81 per share, or 1x forward P/B. To fully understand why you should be careful with QCRH, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

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 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 Tecnoglass (+1,754% 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.