Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here are three small-cap stocks to pass on and some alternatives you should look into instead.
Commerce (CMRC)
Market Cap: $304.1 million
As a founding member of the MACH Alliance advocating for modern tech standards, Commerce (NASDAQ: CMRC) provides a SaaS platform that enables businesses to build and manage online stores, connect with marketplaces, and integrate with point-of-sale systems.
Why Do We Avoid CMRC?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.1% underwhelmed
- Sales are projected to tank by 3.2% over the next 12 months as demand evaporates
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.2% for the last year
At $3.62 per share, Commerce trades at 0.9x forward price-to-sales. Read our free research report to see why you should think twice about including CMRC in your portfolio.
ICU Medical (ICUI)
Market Cap: $4.02 billion
Founded in 1984 and named for its initial focus on intensive care units, ICU Medical (NASDAQ: ICUI) develops and manufactures medical products for infusion therapy, vascular access, and vital care applications used in hospitals and other healthcare settings.
Why Are We Wary of ICUI?
- Sales tumbled by 2.5% annually over the last two years, showing market trends are working against it during this cycle
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share grew slower than its revenue
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
ICU Medical is trading at $167.77 per share, or 18.1x forward P/E. Check out our free in-depth research report to learn more about why ICUI doesn’t pass our bar.
Expro (XPRO)
Market Cap: $1.76 billion
Operating in over 50 countries from deepwater offshore platforms to remote onshore fields, Expro (NYSE: XPRO) provides equipment and services that help oil and gas companies drill wells, measure production, and maintain well integrity.
Why Does XPRO Worry Us?
- Modest revenue base of $1.55 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Gross margin of 20.2% reflects its high production costs and unfavorable asset base
- Low free cash flow margin of 2.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Expro’s stock price of $15.66 implies a valuation ratio of 13.7x forward P/E. Dive into our free research report to see why there are better opportunities than XPRO.
High-quality stocks for all market conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
