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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Pegasystems (PEGA)
Market Cap: $9.30 billion
With a "Center-out Business Architecture" approach that transcends organizational silos, Pegasystems (NASDAQ: PEGA) develops software that helps organizations automate workflows and use artificial intelligence to improve customer experiences and business processes.
Why Is PEGA Not Exciting?
- 11.7% annual revenue growth over the last five years was slower than its software peers
- Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its two-year trend
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
At $55.11 per share, Pegasystems trades at 5.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PEGA.
Choice Hotels (CHH)
Market Cap: $4.19 billion
With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.
Why Do We Steer Clear of CHH?
- Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Choice Hotels’s stock price of $91.26 implies a valuation ratio of 13x forward P/E. If you’re considering CHH for your portfolio, see our FREE research report to learn more.
American Express Global Business Travel (GBTG)
Market Cap: $4.04 billion
Originally spun off from American Express in 2014 but maintaining the Amex GBT brand, Global Business Travel Group (NYSE: GBTG) provides end-to-end business travel and expense management solutions, connecting corporate clients with travel suppliers and offering specialized software services.
Why Should You Dump GBTG?
- 5.3% annual revenue growth over the last two years was slower than its software peers
- Gross margin of 61% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
American Express Global Business Travel is trading at $7.71 per share, or 1.2x forward price-to-sales. Read our free research report to see why you should think twice about including GBTG in your portfolio.
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 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 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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