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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
EverQuote (EVER)
Market Cap: $865 million
Aiming to simplify a once complicated process, EverQuote (NASDAQ: EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers
Why Are We Hesitant About EVER?
- Excessive marketing spend signals little organic demand and traction for its platform
At $24.20 per share, EverQuote trades at 10.2x forward EV/EBITDA. Check out our free in-depth research report to learn more about why EVER doesn’t pass our bar.
Dole (DOLE)
Market Cap: $1.40 billion
Known for its delicious pineapples and Hawaiian roots, Dole (NYSE: DOLE) is a global agricultural company specializing in fresh fruits and vegetables.
Why Does DOLE Worry Us?
- Sales stagnated over the last three years and signal the need for new growth strategies
- Gross margin of 8.4% is an output of its commoditized products
- Poor expense management has led to an operating margin of 2.8% that is below the industry average
Dole’s stock price of $14.66 implies a valuation ratio of 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than DOLE.
Cogent (CCOI)
Market Cap: $1.80 billion
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Are We Wary of CCOI?
- Free cash flow margin dropped by 39.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Cogent is trading at $37.79 per share, or 4.9x forward EV-to-EBITDA. If you’re considering CCOI for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. 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-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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
