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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Amkor (AMKR)
Market Cap: $9.35 billion
Operating through a largely Asian facility footprint, Amkor Technologies (NASDAQ: AMKR) provides outsourced packaging and testing for semiconductors.
Why Is AMKR Not Exciting?
- Sales tumbled by 1.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Gross margin of 14.2% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5.1% for the last two years
At $36.51 per share, Amkor trades at 24.5x forward P/E. Dive into our free research report to see why there are better opportunities than AMKR.
Sally Beauty (SBH)
Market Cap: $1.41 billion
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Do We Pass on SBH?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Smaller revenue base of $3.69 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Falling earnings per share over the last six years has some investors worried as stock prices ultimately follow EPS over the long term
Sally Beauty is trading at $14.27 per share, or 7.2x forward P/E. If you’re considering SBH for your portfolio, see our FREE research report to learn more.
DistributionNOW (DNOW)
Market Cap: $1.57 billion
Spun off from National Oilwell Varco, DistributionNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Should You Dump DNOW?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Earnings per share have contracted by 4.9% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
DistributionNOW’s stock price of $14.70 implies a valuation ratio of 16.3x forward EV-to-EBITDA. To fully understand why you should be careful with DNOW, check out our full research report (it’s free for active Edge members).
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% 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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