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.
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.
nCino (NCNO)
Market Cap: $3.14 billion
Founded in 2011 in North Carolina, nCino (NASDAQ: NCNO) makes cloud-based operating systems for banks and provides that software-as-a-service.
Why Does NCNO Give Us Pause?
- Estimated sales growth of 5.9% for the next 12 months implies demand will slow from its three-year trend
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 60.1%
- Suboptimal cost structure is highlighted by its history of operating margin losses
nCino’s stock price of $27.26 implies a valuation ratio of 5.4x forward price-to-sales. Read our free research report to see why you should think twice about including NCNO in your portfolio.
Insteel (IIIN)
Market Cap: $697.8 million
Growing from a small wire manufacturer to one of the largest in the U.S., Insteel (NYSE: IIIN) provides steel wire reinforcing products for concrete.
Why Should You Dump IIIN?
- Annual sales declines of 13.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 44.9% annually, worse than its revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
Insteel is trading at $35.95 per share, or 18.3x forward P/E. Dive into our free research report to see why there are better opportunities than IIIN.
Grid Dynamics (GDYN)
Market Cap: $1.03 billion
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Are We Cautious About GDYN?
- Modest revenue base of $371.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 8.5% annually while its revenue grew
- Push for growth has led to negative returns on capital, signaling value destruction
At $12.24 per share, Grid Dynamics trades at 31.1x forward P/E. If you’re considering GDYN 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.
