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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Kulicke and Soffa (KLIC)
Market Cap: $1.68 billion
Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices
Why Should You Sell KLIC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 17.2% annually over the last two years
- Sales are projected to tank by 8.8% over the next 12 months as its demand continues evaporating
- Efficiency has decreased over the last five years as its operating margin fell by 16.4 percentage points
Kulicke and Soffa’s stock price of $31.83 implies a valuation ratio of 18.8x forward P/E. Check out our free in-depth research report to learn more about why KLIC doesn’t pass our bar.
Soho House (SHCO)
Market Cap: $1.16 billion
Boasting fancy locations in hubs such as NYC and Miami, Soho House (NYSE: SHCO) is a global hospitality brand offering exclusive private member clubs, hotels, and restaurants.
Why Are We Cautious About SHCO?
- Performance surrounding its members has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- 16× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Soho House is trading at $6.25 per share, or 6.5x forward EV-to-EBITDA. If you’re considering SHCO for your portfolio, see our FREE research report to learn more.
Latham (SWIM)
Market Cap: $697 million
Started as a family business, Latham (NASDAQ: SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Why Are We Hesitant About SWIM?
- Annual revenue declines of 10.9% over the last two years indicate problems with its market positioning
- Earnings per share fell by 20.2% annually over the last four years while its revenue was flat, showing each sale was less profitable
- Negative returns on capital show management lost money while trying to expand the business
At $5.81 per share, Latham trades at 43.2x forward P/E. Read our free research report to see why you should think twice about including SWIM in your portfolio.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
