3 Small-Cap Stocks We Think Twice About

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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Revolve (RVLV)

Market Cap: $1.59 billion

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ:RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.

Why Should You Sell RVLV?

1. Competition may be pulling attention away from its platform as its 6.5% average growth in active customers was choppy
2. Concerning trends in both user engagement and monetization suggest its platform’s efficacy is declining as its average revenue per buyer fell by 1.5% annually
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

Revolve is trading at $22.37 per share, or 30.6x forward EV/EBITDA. To fully understand why you should be careful with RVLV, check out our full research report (it’s free).

ESAB (ESAB)

Market Cap: $7.00 billion

Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE:ESAB) manufactures and sells welding and cutting equipment for numerous industries.

Why Do We Avoid ESAB?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Earnings per share lagged its peers over the last four years as they only grew by 3.6% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.6 percentage points

At $115.37 per share, ESAB trades at 19.9x forward P/E. Dive into our free research report to see why there are better opportunities than ESAB.

Belden (BDC)

Market Cap: $5.16 billion

With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE:BDC) designs, manufactures, and sells electronic components to various industries.

Why Does BDC Fall Short?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Anticipated sales growth of 5% for the next year implies demand will be shaky
3. Earnings per share were flat over the last two years and fell short of the peer group average

Belden’s stock price of $125.64 implies a valuation ratio of 17.4x forward P/E. If you’re considering BDC for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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 Strong Momentum 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-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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