Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Vishay Intertechnology (VSH)
Market Cap: $1.61 billion
Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE: VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.
Why Are We Out on VSH?
- Annual revenue growth of 1.9% over the last five years was below our standards for the semiconductor sector
- Gross margin of 25.3% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 12.5 percentage points
Vishay Intertechnology’s stock price of $11.88 implies a valuation ratio of 15x forward price-to-earnings. Read our free research report to see why you should think twice about including VSH in your portfolio.
ArcBest (ARCB)
Market Cap: $1.47 billion
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Do We Pass on ARCB?
- Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Earnings per share have contracted by 32.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Diminishing returns on capital suggest its earlier profit pools are drying up
ArcBest is trading at $62.03 per share, or 8.4x forward price-to-earnings. To fully understand why you should be careful with ARCB, check out our full research report (it’s free).
Rogers (ROG)
Market Cap: $1.13 billion
With roots dating back to 1832, making it one of America's oldest continuously operating companies, Rogers (NYSE: ROG) designs and manufactures specialized engineered materials and components used in electric vehicles, telecommunications, renewable energy, and other high-performance applications.
Why Is ROG Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.6% annually over the last five years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.1% annually, worse than its revenue
- Free cash flow margin shrank by 7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $60.71 per share, Rogers trades at 17.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why ROG doesn’t pass our bar.
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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
