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.
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 swipe left on and some alternatives you should look into instead.
Etsy (ETSY)
Market Cap: $6.07 billion
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ: ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Why Are We Hesitant About ETSY?
- Increasing competition is redirecting attention to other platforms as it failed to grow its active buyers over the last two years
- Estimated sales decline of 2% for the next 12 months implies a challenging demand environment
- Earnings growth underperformed the sector average over the last three years as its EPS grew by just 2.6% annually
Etsy is trading at $58.17 per share, or 8.2x forward EV/EBITDA. If you’re considering ETSY for your portfolio, see our FREE research report to learn more.
Lucky Strike (LUCK)
Market Cap: $1.41 billion
Born from the transformation of traditional bowling alleys into modern entertainment destinations, Lucky Strike (NYSE: LUCK) operates bowling alleys and other entertainment venues with upscale amenities, arcade games, and food and beverage services across North America.
Why Do We Steer Clear of LUCK?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
- Cash-burning history makes us doubt the long-term viability of its business model
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $10.03 per share, Lucky Strike trades at 33.5x forward P/E. Dive into our free research report to see why there are better opportunities than LUCK.
Tandem Diabetes (TNDM)
Market Cap: $1.08 billion
With technology that automatically adjusts insulin delivery based on continuous glucose monitoring data, Tandem Diabetes Care (NASDAQ: TNDM) develops and manufactures automated insulin delivery systems that help people with diabetes manage their blood glucose levels.
Why Are We Out on TNDM?
- Underwhelming pump shipments over the past two years imply it may need to invest in improvements to get back on track
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 37.4% annually while its revenue grew
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Tandem Diabetes’s stock price of $16.25 implies a valuation ratio of 27.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TNDM in your portfolio.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 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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