3 Small-Cap Stocks Walking a Fine Line

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.

Terex (TEX)

Market Cap: $3.47 billion

With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.

Why Does TEX Fall Short?

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. Incremental sales over the last two years were much less profitable as its earnings per share fell by 16.3% annually while its revenue grew
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.4 percentage points

Terex is trading at $52.94 per share, or 10.5x forward P/E. To fully understand why you should be careful with TEX, check out our full research report (it’s free).

UFP Technologies (UFPT)

Market Cap: $1.57 billion

With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ:UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.

Why Does UFPT Worry Us?

1. Modest revenue base of $588.6 million gives it less fixed cost leverage and fewer distribution channels than larger companies

At $203.13 per share, UFP Technologies trades at 20.4x forward P/E. Read our free research report to see why you should think twice about including UFPT in your portfolio.

Banc of California (BANC)

Market Cap: $2.59 billion

Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE:BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.

Why Are We Wary of BANC?

1. Customers borrowered less money this cycle as its net interest income declined by 1.3% annually over the last five years
2. Tangible book value per share tumbled by 3.9% annually over the last five years, showing banking sector trends are working against its favor during this cycle
3. Push for growth has led to negative returns on capital, signaling value destruction

Banc of California’s stock price of $16.63 implies a valuation ratio of 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than BANC.

Stocks We Like More

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 9 Market-Beating Stocks. 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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