3 Small-Cap Stocks Facing Headwinds

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.

The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Littelfuse (LFUS)

Market Cap: $5.24 billion

The developer of the first blade-type automotive fuse, Littelfuse (NASDAQ:LFUS) provides electrical protection and control components for the automotive, industrial, electronics, and telecommunications industries.

Why Do We Avoid LFUS?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 6% annually over the last two years
2. Sales were less profitable over the last two years as its earnings per share fell by 24.2% annually, worse than its revenue declines
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $211.84 per share, Littelfuse trades at 21.7x forward P/E. If you’re considering LFUS for your portfolio, see our FREE research report to learn more.

Pitney Bowes (PBI)

Market Cap: $1.90 billion

With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE:PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.

Why Are We Wary of PBI?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9% annually over the last five years
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.4% for the last five years
3. Underwhelming 9.4% return on capital reflects management’s difficulties in finding profitable growth opportunities

Read our free research report to see why you should think twice about including PBI in your portfolio.

BrightView (BV)

Market Cap: $1.53 billion

An official field consultant for Major League Baseball, BrightView (NYSE:BV) offers landscaping design, development, and maintenance.

Why Should You Sell BV?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Earnings per share have dipped by 2.8% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. ROIC of 2.2% reflects management’s challenges in identifying attractive investment opportunities

BrightView is trading at $16.04 per share, or 18x forward P/E. Dive into our free research report to see why there are better opportunities than BV.

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 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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.