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. That said, here are three small-cap stocks to avoid and some other investments you should consider instead.

Concrete Pumping (BBCP)

Market Cap: $379.8 million

Going public via SPAC in 2018, Concrete Pumping (NASDAQ: BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.

Why Does BBCP Give Us Pause?

1. Annual sales declines of 5.7% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have contracted by 47.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Concrete Pumping is trading at $7.52 per share, or 51.1x forward P/E. If you’re considering BBCP for your portfolio, see our FREE research report to learn more.

Quest Resource (QRHC)

Market Cap: $24.1 million

Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.

Why Do We Think QRHC Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6.9% annually over the last two years
2. Low free cash flow margin of -0.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $1.14 per share, Quest Resource trades at 8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including QRHC in your portfolio.

WesBanco (WSBC)

Market Cap: $3.43 billion

Tracing its roots back to 1870 in West Virginia, WesBanco (NASDAQ: WSBC) is a bank holding company that provides retail and commercial banking, trust services, insurance, and investment products through its subsidiaries across several Midwestern and Mid-Atlantic states.

Why Does WSBC Fall Short?

1. Inferior net interest margin of 3.4% means it must compensate for lower profitability through increased loan originations
2. Products and services are facing profitability challenges during this cycle, as seen in its flat tangible book value per share over the last five years
3. Low return on equity reflects management’s struggle to allocate funds effectively

WesBanco’s stock price of $36.01 implies a valuation ratio of 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than WSBC.

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