3 Small-Cap Stocks We Approach with Caution

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.

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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

UiPath (PATH)

Market Cap: $5.92 billion

Starting with robotic process automation (RPA) and evolving into a comprehensive automation powerhouse, UiPath (NYSE:PATH) provides an AI-powered business automation platform that enables organizations to create software robots that mimic human actions to streamline repetitive tasks and processes.

Why Does PATH Give Us Pause?

1. Annual revenue growth of 13.2% over the last two years was below our standards for the software sector
2. Products, pricing, or go-to-market strategy may need some adjustments as its 2.3% average billings growth over the last year was weak
3. Estimated sales growth of 9.4% for the next 12 months implies demand will slow from its two-year trend

UiPath is trading at $11.16 per share, or 3.5x forward price-to-sales. Read our free research report to see why you should think twice about including PATH in your portfolio.

PVH (PVH)

Market Cap: $3.03 billion

Founded in 1881 by a husband and wife duo, PVH (NYSE:PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.

Why Should You Sell PVH?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Poor free cash flow margin of 6.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $67.11 per share, PVH trades at 5.7x forward P/E. To fully understand why you should be careful with PVH, check out our full research report (it’s free).

Organon (OGN)

Market Cap: $1.79 billion

Spun off from Merck in 2021 to create a company dedicated to addressing unmet needs in women's health, Organon (NYSE:OGN) is a global healthcare company focused on improving women's health through prescription therapies, medical devices, biosimilars, and established medicines.

Why Does OGN Worry Us?

1. Sales were flat over the last five years, indicating it’s failed to expand this cycle
2. Earnings per share have contracted by 12.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. Free cash flow margin shrank by 22.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Organon’s stock price of $6.90 implies a valuation ratio of 2x forward P/E. If you’re considering OGN for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.