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.
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.
Central Garden & Pet (CENT)
Market Cap: $1.94 billion
Enhancing the lives of both pets and homeowners, Central Garden & Pet (NASDAQ: CENT) is a leading producer and distributor of essential products for pet care, lawn and garden maintenance, and pest control.
Why Do We Avoid CENT?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Central Garden & Pet’s stock price of $33.71 implies a valuation ratio of 12.3x forward P/E. Read our free research report to see why you should think twice about including CENT in your portfolio.
A. O. Smith (AOS)
Market Cap: $9.19 billion
Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE: AOS) manufactures water heating and treatment products for various industries.
Why Are We Hesitant About AOS?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Estimated sales growth of 2.9% for the next 12 months is soft and implies weaker demand
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1.3% annually
A. O. Smith is trading at $66.19 per share, or 16.5x forward P/E. If you’re considering AOS for your portfolio, see our FREE research report to learn more.
Renasant (RNST)
Market Cap: $3.42 billion
Founded in 1904 during a time when the South was rebuilding its economy, Renasant (NYSE: RNST) is a regional bank holding company that offers banking, wealth management, insurance, and specialized lending services throughout the Southeast.
Why Does RNST Worry Us?
- Annual revenue growth of 6.2% over the last five years was below our standards for the banking sector
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6.9% annually
- Annual tangible book value per share growth of 4.5% over the last two years was below our standards for the banking sector
At $35.95 per share, Renasant trades at 0.9x forward P/B. Read our free research report to see why you should think twice about including RNST in your portfolio.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum 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 Comfort Systems (+782% 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
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