3 Small-Cap Stocks That Concern Us

Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.

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.

SunOpta (STKL)

Market Cap: $465.3 million

Committed to clean-label foods, SunOpta (NASDAQ:STKL) is a sustainability-focused food and beverage company specializing in the sourcing, processing, and packaging of organic products.

Why Does STKL Worry Us?

1. Products have few die-hard fans as sales have declined by 3.8% annually over the last three years
2. Subscale operations are evident in its revenue base of $724 million, meaning it has fewer distribution channels than its larger rivals
3. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 16.6%

SunOpta’s stock price of $3.94 implies a valuation ratio of 15x forward price-to-earnings. To fully understand why you should be careful with STKL, check out our full research report (it’s free).

SolarEdge (SEDG)

Market Cap: $774.7 million

Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.

Why Should You Dump SEDG?

1. Sluggish trends in its megawatts shipped suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

SolarEdge is trading at $13.29 per share, or 0.7x forward price-to-sales. If you’re considering SEDG for your portfolio, see our FREE research report to learn more.

HNI (HNI)

Market Cap: $1.93 billion

With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.

Why Does HNI Fall Short?

1. Sales trends were unexciting over the last two years as its 3.4% annual growth was below the typical business services company
2. Earnings per share were flat over the last five years and fell short of the peer group average
3. Free cash flow margin shrank by 2.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $41.98 per share, HNI trades at 11.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than HNI.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.