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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Quest Resource (QRHC)
Market Cap: $27.32 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?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.9% annually over the last two years
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.6% for the last five years
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $1.30 per share, Quest Resource trades at 8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including QRHC in your portfolio.
Oaktree Specialty Lending (OCSL)
Market Cap: $1.06 billion
Managed by Oaktree Capital Management, one of the world's premier alternative investment firms, Oaktree Specialty Lending (NASDAQ: OCSL) is a business development company that provides customized financing solutions to mid-market companies across various industries.
Why Are We Out on OCSL?
- Annual sales declines of 13.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 18.9% annually, worse than its revenue
- Tangible book value per share tumbled by 5.9% annually over the last five years, showing financials sector trends are working against it during this cycle
Oaktree Specialty Lending is trading at $12.04 per share, or 8.8x forward P/E. If you’re considering OCSL for your portfolio, see our FREE research report to learn more.
Howard Hughes Holdings (HHH)
Market Cap: $4.24 billion
Named after the eccentric business magnate and aviator whose legacy lives on in real estate development, Howard Hughes Holdings (NYSE: HHH) develops, owns, and manages master-planned communities and commercial properties across the United States.
Why Do We Pass on HHH?
- Muted 16.2% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Returns on capital are increasing as management makes relatively better investment decisions
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Howard Hughes Holdings’s stock price of $71.26 implies a valuation ratio of 2.8x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why HHH doesn’t pass our bar.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
