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 pass on and some alternatives you should look into instead.
Wolverine Worldwide (WWW)
Market Cap: $1.63 billion
Founded in 1883, Wolverine Worldwide (NYSE: WWW) is a global footwear company with a diverse portfolio of brands including Merrell, Hush Puppies, and Saucony.
Why Should You Sell WWW?
- Products and services have few die-hard fans as sales have declined by 1.9% annually over the last five years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Poor free cash flow margin of 8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Wolverine Worldwide’s stock price of $19.78 implies a valuation ratio of 10.3x forward P/E. Dive into our free research report to see why there are better opportunities than WWW.
Avis Budget Group (CAR)
Market Cap: $4.84 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Do We Pass on CAR?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Avis Budget Group is trading at $138.39 per share, or 33.7x forward P/E. To fully understand why you should be careful with CAR, check out our full research report (it’s free).
Triumph Financial (TFIN)
Market Cap: $1.87 billion
Originally focused on traditional banking before pivoting to serve the transportation sector, Triumph Financial (NYSE: TFIN) provides specialized financial services to the trucking industry, including payments processing, factoring, banking, and data intelligence solutions.
Why Do We Think TFIN Will Underperform?
- Net interest income trends were unexciting over the last five years as its 1.8% annual growth was below the typical banking firm
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 22.2% annually
- Tier one capital ratio of 9.9% raises concerns about the firm’s ability to maintain adequate liquidity
At $78.36 per share, Triumph Financial trades at 1.9x forward P/B. Check out our free in-depth research report to learn more about why TFIN 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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
