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3 Small-Cap Stocks with Warning Signs

By: StockStory

PGNY Cover Image

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 avoid and some other investments you should consider instead.

Progyny (PGNY)

Market Cap: $1.68 billion

Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.

Why Are We Cautious About PGNY?

  1. Smaller revenue base of $1.24 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
  2. Estimated sales growth of 4.8% for the next 12 months implies demand will slow from its two-year trend
  3. Low returns on capital reflect management’s struggle to allocate funds effectively

Progyny’s stock price of $18.80 implies a valuation ratio of 11.2x forward P/E. Dive into our free research report to see why there are better opportunities than PGNY.

Root (ROOT)

Market Cap: $1.18 billion

Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.

Why Is ROOT Not Exciting?

  1. Book value per share tumbled by 158% annually over the last five years, showing insurance sector trends are working against its favor during this cycle
  2. Negative return on equity shows management lost money while trying to expand the business

At $77.50 per share, Root trades at 3.7x forward P/B. To fully understand why you should be careful with ROOT, check out our full research report (it’s free for active Edge members).

F.N.B. Corporation (FNB)

Market Cap: $5.58 billion

Tracing its roots back to 1864 during the Civil War era, F.N.B. Corporation (NYSE: FNB) is a diversified financial services holding company that provides banking, wealth management, and insurance services to consumers and businesses across seven states and Washington, D.C.

Why Do We Think Twice About FNB?

  1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
  2. Net interest margin dropped by 24 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
  3. Earnings per share fell by 5% annually over the last two years while its revenue was flat, showing each sale was less profitable

F.N.B. Corporation is trading at $15.58 per share, or 0.8x forward P/B. Check out our free in-depth research report to learn more about why FNB doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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