Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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.

First Watch (FWRG)

Market Cap: $1.06 billion

Based on a nautical reference to the first work shift aboard a ship, First Watch (NASDAQ: FWRG) is a chain of breakfast and brunch restaurants whose menu is heavily-focused on eggs and griddle items such as pancakes.

Why Do We Think Twice About FWRG?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

First Watch’s stock price of $17.60 implies a valuation ratio of 56.6x forward P/E. Check out our free in-depth research report to learn more about why FWRG doesn’t pass our bar.

EPAM (EPAM)

Market Cap: $9.19 billion

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Why Does EPAM Worry Us?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
2. Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $165.02 per share, EPAM trades at 14.4x forward P/E. To fully understand why you should be careful with EPAM, check out our full research report (it’s free).

Diebold Nixdorf (DBD)

Market Cap: $2.23 billion

With roots dating back to 1859 and a presence in over 100 countries, Diebold Nixdorf (NYSE: DBD) provides automated self-service technology, software, and services that help banks and retailers digitize their customer transactions.

Why Does DBD Give Us Pause?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.8% annually over the last five years
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. ROIC of 3% reflects management’s challenges in identifying attractive investment opportunities

Diebold Nixdorf is trading at $60.75 per share, or 13.9x forward P/E. Dive into our free research report to see why there are better opportunities than DBD.

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 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 Exlservice (+354% 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

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