3 Small-Cap Stocks We're Skeptical Of

Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Qorvo (QRVO)

Market Cap: $8.38 billion

Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.

Why Do We Avoid QRVO?

1. Muted 2.3% annual revenue growth over the last five years shows its demand lagged behind its semiconductor peers
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 22.3 percentage points
3. Free cash flow margin dropped by 11.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Qorvo’s stock price of $90.50 implies a valuation ratio of 15.3x forward P/E. If you’re considering QRVO for your portfolio, see our FREE research report to learn more.

Mattel (MAT)

Market Cap: $5.46 billion

Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ:MAT) is a global children's entertainment company specializing in the design and production of consumer products.

Why Does MAT Give Us Pause?

1. Annual revenue growth of 2.7% over the last two years was below our standards for the consumer discretionary sector
2. Anticipated sales growth of 2.5% for the next year implies demand will be shaky
3. Eroding returns on capital suggest its historical profit centers are aging

Mattel is trading at $17.16 per share, or 10.4x forward P/E. Read our free research report to see why you should think twice about including MAT in your portfolio.

Selective Insurance Group (SIGI)

Market Cap: $4.83 billion

Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ:SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.

Why Do We Pass on SIGI?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4% annually over the last two years
2. Sales are projected to tank by 55.9% over the next 12 months as its demand continues evaporating
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 11.7% annually

At $79.34 per share, Selective Insurance Group trades at 1.5x forward P/B. Check out our free in-depth research report to learn more about why SIGI doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

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Don’t let fear keep you from great opportunities and take a look at 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).

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