3 Small-Cap Stocks with Questionable Fundamentals

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.

Cable One (CABO)

Market Cap: $1.49 billion

Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.

Why Do We Steer Clear of CABO?

1. Demand for its offerings was relatively low as its number of residential data subscribers has underwhelmed
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Free cash flow margin is forecasted to shrink by 4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

Cable One is trading at $256.79 per share, or 6.1x forward price-to-earnings. Read our free research report to see why you should think twice about including CABO in your portfolio.

Monarch (MCRI)

Market Cap: $1.43 billion

Established in 1993, Monarch (NASDAQ:MCRI) operates luxury casinos and resorts, offering high-end gaming, dining, and hospitality experiences.

Why Does MCRI Give Us Pause?

1. Annual revenue growth of 4.5% over the last two years was below our standards for the consumer discretionary sector
2. Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its two-year trend
3. ROIC of 14.5% reflects management’s challenges in identifying attractive investment opportunities

At $73.50 per share, Monarch trades at 15.7x forward price-to-earnings. If you’re considering MCRI for your portfolio, see our FREE research report to learn more.

Insteel (IIIN)

Market Cap: $495.7 million

Growing from a small wire manufacturer to one of the largest in the U.S., Insteel (NYSE:IIIN) provides steel wire reinforcing products for concrete.

Why Do We Think Twice About IIIN?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 18.8% annually over the last two years
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Insteel’s stock price of $25.97 implies a valuation ratio of 17.9x forward price-to-earnings. To fully understand why you should be careful with IIIN, check out our full research report (it’s free).

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.