3 Small-Cap Stocks We Steer Clear Of

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 avoid and some other investments you should consider instead.

B&G Foods (BGS)

Market Cap: $387.1 million

Started as a small grocery store in New York City, B&G Foods (NYSE:BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.

Why Do We Avoid BGS?

1. Sales tumbled by 4.5% annually over the last three years, showing consumer trends are working against its favor
2. Sales were less profitable over the last three years as its earnings per share fell by 21.4% annually, worse than its revenue declines
3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

B&G Foods’s stock price of $4.84 implies a valuation ratio of 8.9x forward P/E. To fully understand why you should be careful with BGS, check out our full research report (it’s free for active Edge members).

Covenant Logistics (CVLG)

Market Cap: $587.9 million

Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ:CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.

Why Do We Pass on CVLG?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. 12.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Waning returns on capital imply its previous profit engines are losing steam

Covenant Logistics is trading at $23.47 per share, or 12.7x forward P/E. If you’re considering CVLG for your portfolio, see our FREE research report to learn more.

Henry Schein (HSIC)

Market Cap: $8.98 billion

With a vast inventory of over 300,000 products stocked in distribution centers spanning more than 5.3 million square feet worldwide, Henry Schein (NASDAQ:HSIC) is a global distributor of healthcare products and services primarily to dental practices, medical offices, and other healthcare facilities.

Why Are We Wary of HSIC?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Free cash flow margin dropped by 2.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $75.68 per share, Henry Schein trades at 14.6x forward P/E. Read our free research report to see why you should think twice about including HSIC in your portfolio.

High-Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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-small-cap company Exlservice (+354% 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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