3 Small-Cap Stocks We Steer Clear Of

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.

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 swipe left on and some alternatives you should look into instead.

PubMatic (PUBM)

Market Cap: $398.2 million

Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.

Why Is PUBM Risky?

1. Below-average net revenue retention rate of 107% suggests it has some trouble expanding within existing accounts
2. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
3. Efficiency has decreased over the last year as its operating margin fell by 7.1 percentage points

PubMatic is trading at $8.59 per share, or 1.5x forward price-to-sales. If you’re considering PUBM for your portfolio, see our FREE research report to learn more.

Evolent Health (EVH)

Market Cap: $411.8 million

Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE:EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.

Why Does EVH Worry Us?

1. Sales trends were unexciting over the last two years as its 7.1% annual growth was below the typical healthcare company
2. Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Evolent Health’s stock price of $3.80 implies a valuation ratio of 14.8x forward P/E. Dive into our free research report to see why there are better opportunities than EVH.

Dime Community Bancshares (DCOM)

Market Cap: $1.14 billion

With roots dating back to 1910 and a name that evokes the historic "dime savings banks" of America's past, Dime Community Bancshares (NASDAQ:DCOM) is a New York-based bank holding company that provides commercial banking and financial services to businesses and consumers throughout Greater Long Island.

Why Are We Wary of DCOM?

1. Muted 1.4% annual revenue growth over the last two years shows its demand lagged behind its banking peers
2. Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable
3. Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 16.1% annually

At $26.08 per share, Dime Community Bancshares trades at 0.8x forward P/B. To fully understand why you should be careful with DCOM, check out our full research report (it’s free for active Edge members).

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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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