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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Rogers (ROG)
Market Cap: $2.51 billion
With roots dating back to 1832, making it one of America's oldest continuously operating companies, Rogers (NYSE: ROG) designs and manufactures specialized engineered materials and components used in electric vehicles, telecommunications, renewable energy, and other high-performance applications.
Why Should You Dump ROG?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 4.7 percentage points
- Earnings per share have contracted by 13.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
At $140.71 per share, Rogers trades at 3.1x trailing 12-month price-to-sales. Read our free research report to see why you should think twice about including ROG in your portfolio.
Azenta (AZTA)
Market Cap: $1.05 billion
Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.
Why Do We Steer Clear of AZTA?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.6% annually over the last two years
- Earnings per share have dipped by 24.8% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Negative free cash flow raises questions about the return timeline for its investments
Azenta is trading at $22.72 per share, or 39x forward P/E. Dive into our free research report to see why there are better opportunities than AZTA.
Kyndryl (KD)
Market Cap: $2.54 billion
Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE: KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.
Why Does KD Fall Short?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last five years
- Forecasted revenue decline of 1.1% for the upcoming 12 months implies demand will fall even further
- Negative returns on capital show that some of its growth strategies have backfired
Kyndryl’s stock price of $11.48 implies a valuation ratio of 6.2x forward P/E. Check out our free in-depth research report to learn more about why KD doesn’t pass our bar.
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%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. 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 (+1,326% between June 2020 and June 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.
