3 Small-Cap Stocks in Hot Water

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.

CTS (CTS)

Market Cap: $1.24 billion

With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE:CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.

Why Do We Avoid CTS?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.1% annually over the last two years
2. Smaller revenue base of $515.8 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

At $41.48 per share, CTS trades at 19.1x forward P/E. If you’re considering CTS for your portfolio, see our FREE research report to learn more.

Werner (WERN)

Market Cap: $1.71 billion

Conducting business in over a 100 countries, Werner (NASDAQ:WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.

Why Should You Sell WERN?

1. Sales tumbled by 5.9% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share fell by 34.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Werner’s stock price of $27.74 implies a valuation ratio of 23x forward P/E. To fully understand why you should be careful with WERN, check out our full research report (it’s free).

Privia Health (PRVA)

Market Cap: $2.73 billion

Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.

Why Are We Hesitant About PRVA?

1. Subscale operations are evident in its revenue base of $1.80 billion, meaning it has fewer distribution channels than its larger rivals
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Negative returns on capital show management lost money while trying to expand the business

Privia Health is trading at $22.35 per share, or 26.2x forward P/E. If you’re considering PRVA for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 Kadant (+351% 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