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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here are three small-cap stocks to pass on and some alternatives you should look into instead.
Hillman (HLMN)
Market Cap: $1.42 billion
Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ:HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.
Why Does HLMN Give Us Pause?
- Annual revenue growth of 2.1% over the last five years was below our standards for the industrials sector
- Operating margin of 4.5% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Underwhelming 2.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
Hillman’s stock price of $7.29 implies a valuation ratio of 11.7x forward P/E. Dive into our free research report to see why there are better opportunities than HLMN.
Atlanticus Holdings (ATLC)
Market Cap: $1.40 billion
Using data analytics to serve the millions of Americans with less-than-perfect credit scores, Atlanticus Holdings (NASDAQ:ATLC) provides technology and services that help lenders offer credit products to consumers often overlooked by traditional financing providers.
Why Does ATLC Fall Short?
- Flat earnings per share over the last four years underperformed the sector average
- 28× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $92.52 per share, Atlanticus Holdings trades at 8.3x forward P/E. To fully understand why you should be careful with ATLC, check out our full research report (it’s free).
TETRA Technologies (TTI)
Market Cap: $1.05 billion
Operating across six continents with approximately 40,000 acres of mineral-rich brine leases in Arkansas, TETRA Technologies (NYSE:TTI) provides well completion fluids and water management services to oil and gas operators.
Why Do We Pass on TTI?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.4% annually over the last ten years
- Revenue base of $641.8 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 29.3%
TETRA Technologies is trading at $7.21 per share, or 25.9x forward P/E. Dive into our free research report to see why there are better opportunities than TTI.
Stocks We Like More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.