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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Box (BOX)
Market Cap: $4.35 billion
Known as the "Content Cloud" for managing the 90% of business data that exists as unstructured files and documents, Box (NYSE:BOX) provides a cloud-based platform that enables organizations to securely manage, share, and collaborate on their content from anywhere on any device.
Why Do We Think Twice About BOX?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 11.9% underwhelmed
- Projected sales growth of 7.7% for the next 12 months suggests sluggish demand
- Efficiency has decreased over the last year as its operating margin fell by 1.6 percentage points
Box’s stock price of $30.22 implies a valuation ratio of 3.8x forward price-to-sales. Read our free research report to see why you should think twice about including BOX in your portfolio.
eXp World (EXPI)
Market Cap: $1.68 billion
Founded in 2009, eXp World (NASDAQ:EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.
Why Do We Think EXPI Will Underperform?
- Performance surrounding its transactions has lagged its peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 25% annually while its revenue grew
- Low free cash flow margin of 3.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $10.71 per share, eXp World trades at 22.9x forward EV-to-EBITDA. If you’re considering EXPI for your portfolio, see our FREE research report to learn more.
ANI Pharmaceuticals (ANIP)
Market Cap: $1.71 billion
With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ:ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.
Why Are We Wary of ANIP?
- Revenue base of $826.9 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 4.5 percentage points
- Negative returns on capital show that some of its growth strategies have backfired
ANI Pharmaceuticals is trading at $82.03 per share, or 10.3x forward P/E. To fully understand why you should be careful with ANIP, check out our full research report (it’s free for active Edge members).
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. 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.