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 avoid and some other investments you should consider instead.
European Wax Center (EWCZ)
Market Cap: $182.9 million
Founded by two siblings, European Wax Center (NASDAQ: EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.
Why Should You Sell EWCZ?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Projected sales decline of 1.4% for the next 12 months points to a tough demand environment ahead
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
At $4.17 per share, European Wax Center trades at 13.7x forward P/E. If you’re considering EWCZ for your portfolio, see our FREE research report to learn more.
Avis Budget Group (CAR)
Market Cap: $5.52 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Is CAR Risky?
- Sluggish trends in its available rental days - car rental suggest customers aren’t adopting its solutions as quickly as the company hoped
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Avis Budget Group is trading at $154.26 per share, or 11.3x forward P/E. To fully understand why you should be careful with CAR, check out our full research report (it’s free).
Integer Holdings (ITGR)
Market Cap: $3.70 billion
With its name reflecting the mathematical term for "whole" or "complete," Integer Holdings (NYSE: ITGR) is a medical device outsource manufacturer that produces components and systems for cardiac, vascular, neurological, and other medical applications.
Why Is ITGR Not Exciting?
- Modest revenue base of $1.79 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Free cash flow margin dropped by 5.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Low returns on capital reflect management’s struggle to allocate funds effectively
Integer Holdings’s stock price of $106.87 implies a valuation ratio of 15.7x forward P/E. Check out our free in-depth research report to learn more about why ITGR doesn’t pass our bar.
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% 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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