3 Small-Cap Stocks with Questionable Fundamentals

Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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.

Asure (ASUR)

Market Cap: $258.5 million

Created from the merger of two small workforce management companies in 2007, Asure (NASDAQ:ASUR) provides cloud based payroll and HR software for small and medium-sized businesses (SMBs).

Why Is ASUR Not Exciting?

1. Annual revenue growth of 15.1% over the last three years was below our standards for the software sector
2. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 7.9% underwhelmed
3. Efficiency has decreased over the last year as its operating margin fell by 5.4 percentage points

At $9.52 per share, Asure trades at 1.9x forward price-to-sales. Read our free research report to see why you should think twice about including ASUR in your portfolio.

Steven Madden (SHOO)

Market Cap: $1.79 billion

As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.

Why Does SHOO Give Us Pause?

1. 5.7% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 9.2% annually
3. Free cash flow margin is forecasted to shrink by 2.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

Steven Madden’s stock price of $25.66 implies a valuation ratio of 12.9x forward P/E. Check out our free in-depth research report to learn more about why SHOO doesn’t pass our bar.

Landstar (LSTR)

Market Cap: $4.86 billion

Covering billions of miles throughout North America, Landstar (NASDAQ:LSTR) is a transportation company specializing in freight and last-mile delivery services.

Why Do We Avoid LSTR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 16.5% annually over the last two years
2. Flat earnings per share over the last five years lagged its peers
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Landstar is trading at $138.94 per share, or 23.7x forward P/E. To fully understand why you should be careful with LSTR, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free.