Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Amplitude (AMPL)
Market Cap: $1.28 billion
Born from the realization that companies were flying blind when it came to understanding user behavior in their digital products, Amplitude (NASDAQ: AMPL) provides a digital analytics platform that helps businesses understand how people use their digital products to improve user experiences and drive revenue growth.
Why Are We Cautious About AMPL?
- Struggled to drive increased usage of its software, demonstrated by its subpar 103% net revenue retention rate
- Poor expense management has led to operating margin losses
- Poor free cash flow margin of 5.5% for the last year limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Amplitude’s stock price of $9.54 implies a valuation ratio of 3.1x forward price-to-sales. Check out our free in-depth research report to learn more about why AMPL doesn’t pass our bar.
Harley-Davidson (HOG)
Market Cap: $2.82 billion
Founded in 1903, Harley-Davidson (NYSE: HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.
Why Do We Steer Clear of HOG?
- Sluggish trends in its motorcycles sold suggest customers aren’t adopting its solutions as quickly as the company hoped
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Harley-Davidson is trading at $26.16 per share, or 28.7x forward P/E. Read our free research report to see why you should think twice about including HOG in your portfolio.
Golar LNG (GLNG)
Market Cap: $5.07 billion
Pioneering a way to monetize stranded gas reserves that would otherwise be uneconomical to develop, Golar LNG (NASDAQ: GLNG) converts ships into floating liquefied natural gas facilities that liquefy natural gas at offshore sites.
Why Does GLNG Fall Short?
- Annual sales declines of 2.7% for the past five years show its products and services struggled to connect with the market during this cycle
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $49.78 per share, Golar LNG trades at 76.3x forward P/E. To fully understand why you should be careful with GLNG, check out our full research report (it’s free).
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
