3 Small-Cap Stocks We Find Risky

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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Macy's (M)

Market Cap: $5.47 billion

With a storied history that began with its 1858 founding, Macy’s (NYSE:M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Why Should You Dump M?

1. Recent store closures and weak same-store sales point to soft demand and an operational restructuring
2. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
3. Forecasted revenue decline of 3.8% for the upcoming 12 months implies demand will fall even further

Macy’s stock price of $20.30 implies a valuation ratio of 10.4x forward P/E. Dive into our free research report to see why there are better opportunities than M.

RE/MAX (RMAX)

Market Cap: $151 million

Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.

Why Should You Sell RMAX?

1. Sluggish trends in its agents suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 7.1% annually while its revenue grew
3. Underwhelming 0.2% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $7.54 per share, RE/MAX trades at 5.9x forward P/E. Read our free research report to see why you should think twice about including RMAX in your portfolio.

THOR Industries (THO)

Market Cap: $5.36 billion

Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.

Why Do We Think THO Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.2% annually over the last two years
2. Earnings per share have contracted by 16.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Waning returns on capital imply its previous profit engines are losing steam

THOR Industries is trading at $103.17 per share, or 24.9x forward P/E. Check out our free in-depth research report to learn more about why THO doesn’t pass our bar.

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 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.