3 Small-Cap Stocks We Keep Off Our Radar

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. That said, here are three small-cap stocks to avoid and some other investments you should consider instead.

FormFactor (FORM)

Market Cap: $5.84 billion

With customers across the foundry and fabless markets, FormFactor (NASDAQ:FORM) is a US-based provider of test and measurement technologies for semiconductors.

Why Are We Out on FORM?

1. 2.4% annual revenue growth over the last five years was slower than its semiconductor peers
2. Earnings per share fell by 5.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Investment activity picked up over the last five years, pressuring its weak free cash flow margin of 3.7%

At $75.35 per share, FormFactor trades at 48.9x forward P/E. Read our free research report to see why you should think twice about including FORM in your portfolio.

Flowers Foods (FLO)

Market Cap: $2.34 billion

With Wonder Bread as its premier brand, Flower Foods (NYSE:FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.

Why Should You Dump FLO?

1. Declining unit sales over the past two years imply it may need to invest in product improvements to get back on track
2. Anticipated sales growth of 2.9% for the next year implies demand will be shaky
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

Flowers Foods is trading at $11.13 per share, or 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than FLO.

Atlanticus Holdings (ATLC)

Market Cap: $917.5 million

Using data analytics to serve the millions of Americans with less-than-perfect credit scores, Atlanticus Holdings (NASDAQ:ATLC) provides technology and services that help lenders offer credit products to consumers often overlooked by traditional financing providers.

Why Does ATLC Give Us Pause?

1. Earnings per share have dipped by 6.2% annually over the past four years, which is concerning because stock prices follow EPS over the long term

Atlanticus Holdings’s stock price of $60.54 implies a valuation ratio of 7.8x forward P/E. If you’re considering ATLC for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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.