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.

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.

Steven Madden (SHOO)

Market Cap: $2.29 billion

As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ: SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.

Why Do We Steer Clear of SHOO?

1. Sales trends were unexciting over the last five years as its 16.1% annual growth was below the typical consumer discretionary company
2. Poor free cash flow margin of 6.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Steven Madden’s stock price of $31.37 implies a valuation ratio of 15.7x forward P/E. To fully understand why you should be careful with SHOO, check out our full research report (it’s free).

ChargePoint (CHPT)

Market Cap: $126.3 million

The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE: CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.

Why Does CHPT Fall Short?

1. Sales tumbled by 9.9% annually over the last two years, showing market trends are working against its favor during this cycle
2. Cash-burning history makes us doubt the long-term viability of its business model
3. EBITDA losses may force it to accept punitive lending terms or high-cost debt

At $5.32 per share, ChargePoint trades at 0.3x forward price-to-sales. If you’re considering CHPT for your portfolio, see our FREE research report to learn more.

Ingredion (INGR)

Market Cap: $7.07 billion

Known for its ability to turn ordinary corn into thousands of different food ingredients, Ingredion (NYSE: INGR) transforms grains, fruits, vegetables and other plant-based materials into specialty starches, sweeteners and other ingredients for food, beverage and industrial markets.

Why Is INGR Not Exciting?

1. Products have few die-hard fans as sales have declined by 3.1% annually over the last three years
2. Projected sales growth of 2% for the next 12 months suggests sluggish demand
3. Free cash flow margin shrank by 8.3 percentage points over the last year, suggesting the company is consuming more capital to stay competitive

Ingredion is trading at $114.33 per share, or 9.8x forward P/E. Read our free research report to see why you should think twice about including INGR in your portfolio.

Stocks We Like More

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.