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.

Jack in the Box (JACK)

Market Cap: $287.3 million

Delighting customers since its inception in 1951, Jack in the Box (NASDAQ:JACK) is a distinctive fast-food chain known for its bold flavors, innovative menu items, and quirky marketing.

Why Should You Dump JACK?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
2. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 9.3 percentage points
3. 11× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Jack in the Box is trading at $15.09 per share, or 4x forward P/E. If you’re considering JACK for your portfolio, see our FREE research report to learn more.

CVB Financial (CVBF)

Market Cap: $2.61 billion

With roots dating back to 1974 and a focus on serving small and medium-sized businesses, CVB Financial (NASDAQ:CVBF) operates Citizens Business Bank, providing banking, lending, and trust services to businesses and individuals across California.

Why Is CVBF Risky?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 2% annually over the last two years
2. 2% annual net interest income growth over the last five years was slower than its banking peers
3. Earnings per share have dipped by 2.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term

At $19.25 per share, CVB Financial trades at 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than CVBF.

Goodyear (GT)

Market Cap: $2.23 billion

With its iconic blimp floating above major sporting events since 1925, Goodyear (NYSE:GT) is one of the world's largest tire manufacturers, producing and selling tires for automobiles, trucks, aircraft, and other vehicles, along with related services.

Why Are We Wary of GT?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last two years
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Underwhelming 4.9% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up

Goodyear’s stock price of $7.81 implies a valuation ratio of 15.9x forward P/E. If you’re considering GT for your portfolio, see our FREE research report to learn 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.