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.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Lamb Weston (LW)

Market Cap: $6.92 billion

Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.

Why Does LW Fall Short?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 22.9%

At $49.71 per share, Lamb Weston trades at 18.8x forward P/E. If you’re considering LW for your portfolio, see our FREE research report to learn more.

NN (NNBR)

Market Cap: $86.34 million

Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.

Why Should You Sell NNBR?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.4% annually over the last two years
2. Earnings per share fell by 18.8% annually over the last five years while its revenue was flat, partly because it diluted shareholders
3. Negative free cash flow raises questions about the return timeline for its investments

NN is trading at $1.74 per share, or 26.3x forward P/E. Check out our free in-depth research report to learn more about why NNBR doesn’t pass our bar.

DXC (DXC)

Market Cap: $2.27 billion

Born from the 2017 merger of Computer Sciences Corporation and HP Enterprise's services business, DXC Technology (NYSE:DXC) is a global IT services company that helps businesses transform their technology infrastructure, applications, and operations.

Why Do We Pass on DXC?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Forecasted revenue decline of 1.9% for the upcoming 12 months implies demand will fall even further
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

DXC’s stock price of $13.50 implies a valuation ratio of 4.2x forward P/E. Read our free research report to see why you should think twice about including DXC 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.