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.
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 swipe left on and some alternatives you should look into instead.
Mattel (MAT)
Market Cap: $6.22 billion
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ: MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Why Are We Wary of MAT?
- Sales trends were unexciting over the last two years as its 1.8% annual growth was below the typical consumer discretionary company
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Diminishing returns on capital suggest its earlier profit pools are drying up
Mattel is trading at $19.16 per share, or 11.6x forward P/E. To fully understand why you should be careful with MAT, check out our full research report (it’s free).
Graphic Packaging Holding (GPK)
Market Cap: $6.59 billion
Founded in 1991, Graphic Packaging (NYSE: GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Is GPK Risky?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Earnings per share have dipped by 5.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin dropped by 10.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $21.85 per share, Graphic Packaging Holding trades at 8.9x forward P/E. Check out our free in-depth research report to learn more about why GPK doesn’t pass our bar.
Lumen (LUMN)
Market Cap: $4.26 billion
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE: LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Why Should You Dump LUMN?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 9.4% annually over the last five years
- Free cash flow margin dropped by 7.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Lumen’s stock price of $4.16 implies a valuation ratio of 1.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than LUMN.
High-Quality Stocks for All Market Conditions
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 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
