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 avoid and some other investments you should consider instead.
Amkor (AMKR)
Market Cap: $5.58 billion
Operating through a largely Asian facility footprint, Amkor Technologies (NASDAQ: AMKR) provides outsourced packaging and testing for semiconductors.
Why Is AMKR Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.4% annually over the last two years
- Gross margin of 14.4% reflects its high production costs
- Poor expense management has led to an operating margin of 7% that is below the industry average
Amkor’s stock price of $22.48 implies a valuation ratio of 17.1x forward P/E. Dive into our free research report to see why there are better opportunities than AMKR.
Simmons First National (SFNC)
Market Cap: $2.73 billion
With roots dating back to 1903 and a presence across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, Simmons First National (NASDAQ: SFNC) is a regional bank holding company that provides banking and financial services to individuals and businesses.
Why Do We Pass on SFNC?
- Net interest income stagnated over the last five years and signal the need for new growth strategies
- Sales were less profitable over the last five years as its earnings per share fell by 11.8% annually, worse than its revenue declines
- Low interest coverage ratio indicates the company may struggle to service its debt obligations if operational performance deteriorates
Simmons First National is trading at $19.17 per share, or 0.7x forward P/B. Check out our free in-depth research report to learn more about why SFNC doesn’t pass our bar.
Hilltop Holdings (HTH)
Market Cap: $1.86 billion
Transformed from a residential communities business to a financial services powerhouse in 2007, Hilltop Holdings (NYSE: HTH) is a Texas-based financial holding company that provides banking, broker-dealer, and mortgage origination services.
Why Do We Steer Clear of HTH?
- Net interest income was flat over the last five years, indicating it’s failed to expand this cycle
- Efficiency ratio is expected to worsen by 32.3 percentage points over the next year
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 11.6% annually, worse than its revenue
At $29.60 per share, Hilltop Holdings trades at 0.8x forward P/B. To fully understand why you should be careful with HTH, check out our full research report (it’s free).
Stocks We Like More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
