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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
YETI (YETI)
Market Cap: $3.37 billion
Founded by two brothers from Texas, YETI (NYSE: YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.
Why Do We Think YETI Will Underperform?
- Sales trends were unexciting over the last five years as its 12.7% annual growth was below the typical consumer discretionary company
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 13.5 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
YETI is trading at $43.35 per share, or 16.5x forward P/E. Check out our free in-depth research report to learn more about why YETI doesn’t pass our bar.
Quest Resource (QRHC)
Market Cap: $42.99 million
Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.
Why Should You Dump QRHC?
- Sales tumbled by 3.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $2.08 per share, Quest Resource trades at 53.8x forward P/E. Read our free research report to see why you should think twice about including QRHC in your portfolio.
Stellar Bancorp (STEL)
Market Cap: $1.66 billion
Created through strategic mergers to serve the growing Texas business community, Stellar Bancorp (NYSE: STEL) is a Texas bank holding company that provides commercial banking services primarily to small and medium-sized businesses and professionals.
Why Is STEL Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.8% annually over the last two years
- Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 36 basis points (100 basis points = 1 percentage point)
- Sales were less profitable over the last two years as its earnings per share fell by 8.6% annually, worse than its revenue declines
Stellar Bancorp’s stock price of $32.42 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than STEL.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
