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.

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 swipe left on and some alternatives you should look into instead.

European Wax Center (EWCZ)

Market Cap: $261.3 million

Founded by two siblings, European Wax Center (NASDAQ:EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.

Why Does EWCZ Fall Short?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
2. Projected sales decline of 1.4% for the next 12 months points to a tough demand environment ahead
3. Flat earnings per share over the last three years lagged its peers

At $6.03 per share, European Wax Center trades at 19.5x forward P/E. Dive into our free research report to see why there are better opportunities than EWCZ.

iRhythm (IRTC)

Market Cap: $4.64 billion

Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.

Why Is IRTC Not Exciting?

1. Earnings per share fell by 5.6% annually over the last five years while its revenue grew, partly because it diluted shareholders
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. High net-debt-to-EBITDA ratio of 124× increases the risk of forced asset sales or dilutive financing if operational performance weakens

iRhythm’s stock price of $145.48 implies a valuation ratio of 81.2x forward EV-to-EBITDA. If you’re considering IRTC for your portfolio, see our FREE research report to learn more.

Supernus Pharmaceuticals (SUPN)

Market Cap: $1.83 billion

With a diverse portfolio of eight FDA-approved medications targeting neurological conditions, Supernus Pharmaceuticals (NASDAQ:SUPN) develops and markets treatments for central nervous system disorders including epilepsy, ADHD, Parkinson's disease, and migraine.

Why Do We Steer Clear of SUPN?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Modest revenue base of $668 million gives it less fixed cost leverage and fewer distribution channels than larger companies
3. Sales are projected to tank by 5.5% over the next 12 months as demand evaporates further

Supernus Pharmaceuticals is trading at $32.15 per share, or 15.9x forward P/E. To fully understand why you should be careful with SUPN, check out our full research report (it’s free).

Stocks We Like More

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 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.