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

GXO Logistics (GXO)

Market Cap: $6.02 billion

With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.

Why Does GXO Worry Us?

1. Earnings per share have dipped by 1.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
2. ROIC of 2.9% reflects management’s challenges in identifying attractive investment opportunities
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

GXO Logistics’s stock price of $52.74 implies a valuation ratio of 17.7x forward P/E. If you’re considering GXO for your portfolio, see our FREE research report to learn more.

Interface (TILE)

Market Cap: $1.66 billion

Pioneering carbon-neutral flooring since its founding in 1973, Interface (NASDAQ:TILE) is a global manufacturer of modular carpet tiles, luxury vinyl tile (LVT), and rubber flooring that specializes in carbon-neutral and sustainable flooring solutions.

Why Do We Think Twice About TILE?

1. Annual revenue growth of 3.3% over the last five years was below our standards for the business services sector
2. Anticipated sales growth of 4.4% for the next year implies demand will be shaky
3. Earnings per share lagged its peers over the last five years as they only grew by 6.2% annually

Interface is trading at $28.43 per share, or 14.3x forward P/E. Check out our free in-depth research report to learn more about why TILE doesn’t pass our bar.

Integer Holdings (ITGR)

Market Cap: $2.59 billion

With its name reflecting the mathematical term for "whole" or "complete," Integer Holdings (NYSE:ITGR) is a medical device outsource manufacturer that produces components and systems for cardiac, vascular, neurological, and other medical applications.

Why Are We Cautious About ITGR?

1. Smaller revenue base of $1.83 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
3. Free cash flow margin shrank by 5.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $71.21 per share, Integer Holdings trades at 11.7x forward P/E. Read our free research report to see why you should think twice about including ITGR in your portfolio.

Stocks We Like More

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 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.