Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.

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 swipe left on and some alternatives you should look into instead.

Kulicke and Soffa (KLIC)

Market Cap: $2.03 billion

Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices

Why Should You Dump KLIC?

1. Annual sales declines of 24.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 28.3% annually
3. Free cash flow margin dropped by 10.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Kulicke and Soffa is trading at $38.05 per share, or 19.6x forward price-to-earnings. If you’re considering KLIC for your portfolio, see our FREE research report to learn more.

Nu Skin (NUS)

Market Cap: $395.8 million

With person-to-person marketing and sales rather than selling through retail stores, Nu Skin (NYSE: NUS) is a personal care and dietary supplements company that engages in direct selling.

Why Should You Sell NUS?

1. Inability to adjust its cost structure while its revenue declined over the last year led to a 11.2 percentage point drop in the company’s operating margin
2. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable

At $7.86 per share, Nu Skin trades at 7.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why NUS doesn’t pass our bar.

Pangaea (PANL)

Market Cap: $336.5 million

Established in 1996, Pangaea Logistics (NASDAQ: PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.

Why Is PANL Risky?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 19.6% annually over the last two years
2. Issuance of new shares over the last two years caused its earnings per share to fall by 43.8% annually, even worse than its revenue declines
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.4 percentage points

Pangaea’s stock price of $5.20 implies a valuation ratio of 5.9x forward price-to-earnings. To fully understand why you should be careful with PANL, check out our full research report (it’s free).

Stocks We Like More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.