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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Lattice Semiconductor (LSCC)

Market Cap: $6.18 billion

A global leader in its category, Lattice Semiconductor (NASDAQ: LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.

Why Do We Think Twice About LSCC?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 16.1% annually over the last two years
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 9.7 percentage points
3. Earnings growth underperformed the sector average over the last five years as its EPS grew by just 5.6% annually

Lattice Semiconductor’s stock price of $45.01 implies a valuation ratio of 38.1x forward P/E. If you’re considering LSCC for your portfolio, see our FREE research report to learn more.

Gray Television (GTN)

Market Cap: $419.1 million

Specializing in local media coverage, Gray Television (NYSE: GTN) is a broadcast company supplying digital media to various markets in the United States.

Why Is GTN Risky?

1. Products and services fail to spark excitement with consumers, as seen in its flat sales over the last two years
2. Estimated sales decline of 11.7% for the next 12 months implies an even more challenging demand environment
3. Projected 8.3 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position

Gray Television is trading at $3.99 per share, or 0.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including GTN in your portfolio.

Luxfer (LXFR)

Market Cap: $304.5 million

With its magnesium alloys used in the construction of the famous Spirit of St. Louis aircraft, Luxfer (NYSE: LXFR) offers specialized materials, components, and gas containment devices to various industries.

Why Should You Dump LXFR?

1. Muted 1.6% annual revenue growth over the last one years shows its demand lagged behind its industrials peers
2. Free cash flow margin dropped by 8.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Eroding returns on capital suggest its historical profit centers are aging

At $11.43 per share, Luxfer trades at 10.9x forward P/E. If you’re considering LXFR for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free.