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 swipe left on and some alternatives you should look into instead.
Portillo's (PTLO)
Market Cap: $384.8 million
Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ: PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.
Why Should You Sell PTLO?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Low free cash flow margin of -0.6% declined over the last year as its investments ramped, giving it little breathing room
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $5.35 per share, Portillo's trades at 30.8x forward P/E. Check out our free in-depth research report to learn more about why PTLO doesn’t pass our bar.
Western Union (WU)
Market Cap: $3.02 billion
With a history dating back to 1851 when it began as a telegraph company, Western Union (NYSE: WU) is a global money transfer service that enables consumers and businesses to send funds across borders and currencies, typically within minutes.
Why Do We Steer Clear of WU?
- Annual sales declines of 2.9% for the past five years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
Western Union is trading at $9.59 per share, or 5.3x forward P/E. If you’re considering WU for your portfolio, see our FREE research report to learn more.
TowneBank (TOWN)
Market Cap: $2.67 billion
Founded in 1998 with a commitment to community-centered banking in the Hampton Roads region, TowneBank (NASDAQ: TOWN) is a community-focused financial institution providing banking, lending, and wealth management services to individuals and businesses in Virginia and North Carolina.
Why Are We Cautious About TOWN?
- Sales trends were unexciting over the last five years as its 5.1% annual growth was below the typical banking company
- Net interest income trends were unexciting over the last five years as its 9.9% annual growth was below the typical banking firm
- Estimated tangible book value per share growth of 2% for the next 12 months implies profitability will slow from its two-year trend
TowneBank’s stock price of $34.26 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including TOWN in your portfolio.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
