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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Angi (ANGI)
Market Cap: $773.1 million
Created by IAC’s mergers of Angie’s List and HomeAdvisor, ANGI (NASDAQ: ANGI) operates the largest online marketplace for home services in the US.
Why Is ANGI Not Exciting?
- Intense competition is diverting traffic from its platform as its service requests fell by 24.1% annually
- Forecasted revenue decline of 8.7% for the upcoming 12 months implies demand will fall even further
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
Angi’s stock price of $16.11 implies a valuation ratio of 5.4x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than ANGI.
Marqeta (MQ)
Market Cap: $2.18 billion
Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ: MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.
Why Do We Think Twice About MQ?
- Software offerings aren’t resonating in this new AI paradigm as its revenue declined by 2.8% annually over the last three years
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 69.4%
Marqeta is trading at $4.70 per share, or 3.8x forward price-to-sales. Read our free research report to see why you should think twice about including MQ in your portfolio.
Diebold Nixdorf (DBD)
Market Cap: $1.79 billion
With roots dating back to 1859 and a presence in over 100 countries, Diebold Nixdorf (NYSE: DBD) provides automated self-service technology, software, and services that help banks and retailers digitize their customer transactions.
Why Does DBD Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.9% annually over the last five years
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Negative returns on capital show that some of its growth strategies have backfired
At $47.98 per share, Diebold Nixdorf trades at 12.2x forward P/E. Check out our free in-depth research report to learn more about why DBD doesn’t pass our bar.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
