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 pass on and some alternatives you should look into instead.
Figs (FIGS)
Market Cap: $2.54 billion
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Why Do We Steer Clear of FIGS?
- Demand for its offerings was relatively low as its number of active customers has underwhelmed
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Figs is trading at $15.27 per share, or 43.3x forward P/E. Check out our free in-depth research report to learn more about why FIGS doesn’t pass our bar.
Primoris (PRIM)
Market Cap: $3.89 billion
Listed on the NASDAQ in 2008, Primoris (NYSE:PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Are We Hesitant About PRIM?
- High input costs result in an inferior gross margin of 10.3% that must be offset through higher volumes
- Earnings per share have contracted by 1.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.2% for the last five years
Primoris’s stock price of $72.00 implies a valuation ratio of 18.4x forward P/E. Dive into our free research report to see why there are better opportunities than PRIM.
AMC Entertainment (AMC)
Market Cap: $2.30 billion
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE:AMC) operates movie theaters primarily in the US and Europe.
Why Is AMC Risky?
- Lackluster 7.9% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Free cash flow margin is projected to show no improvement next year
At $2.58 per share, AMC Entertainment trades at 13.3x forward EV-to-EBITDA. To fully understand why you should be careful with AMC, check out our full research report (it’s free).
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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.