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.
Boston Beer (SAM)
Market Cap: $2.32 billion
Known for its flavorful beverages challenging the status quo, Boston Beer (NYSE: SAM) is a pioneer in craft brewing and a symbol of American innovation in the alcoholic beverage industry.
Why Are We Wary of SAM?
- 1.6% annual revenue growth over the last three years was slower than its consumer staples peers
- Revenue base of $2.05 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Forecasted revenue decline of 4.2% for the upcoming 12 months implies demand will fall off a cliff
At $217.48 per share, Boston Beer trades at 22.8x forward P/E. Dive into our free research report to see why there are better opportunities than SAM.
Transcat (TRNS)
Market Cap: $737.9 million
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Why Are We Hesitant About TRNS?
- Efficiency has decreased over the last five years as its operating margin fell by 1.7 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Transcat is trading at $79.50 per share, or 22.8x forward EV-to-EBITDA. To fully understand why you should be careful with TRNS, check out our full research report (it’s free).
Avnet (AVT)
Market Cap: $4.36 billion
With a century-long history of adapting to technological evolution, Avnet (NASDAQ: AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Why Does AVT Worry Us?
- Sales tumbled by 8.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share have dipped by 34.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Low free cash flow margin of -0.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Avnet’s stock price of $52.20 implies a valuation ratio of 9.9x forward P/E. Check out our free in-depth research report to learn more about why AVT doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
