3 Small-Cap Stocks with Questionable Fundamentals
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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
fuboTV (FUBO)
Market Cap: $293.8 million
Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
Why Are We Cautious About FUBO?
- Footprint is expanding as its domestic subscribers have grown at a decent pace
- Poor expense management has led to operating margin losses
- Cash burn makes us question whether it can achieve sustainable long-term growth
fuboTV is trading at $10.01 per share, or 2,083.5x forward P/E. To fully understand why you should be careful with FUBO, check out our full research report (it’s free).
Varonis Systems (VRNS)
Market Cap: $3.78 billion
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ:VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Do We Avoid VRNS?
- 16.1% annual revenue growth over the last five years was slower than its software peers
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Efficiency has decreased over the last year as its operating margin fell by 2.5 percentage points
At $33.12 per share, Varonis Systems trades at 4.9x forward price-to-sales. Read our free research report to see why you should think twice about including VRNS in your portfolio.
10x Genomics (TXG)
Market Cap: $3.70 billion
Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ:TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.
Why Do We Pass on TXG?
- Annual revenue growth of 1.1% over the last two years was below our standards for the healthcare sector
- Modest revenue base of $638.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Push for growth has led to negative returns on capital, signaling value destruction
10x Genomics’s stock price of $28.80 implies a valuation ratio of 6.3x forward price-to-sales. Check out our free in-depth research report to learn more about why TXG doesn’t pass our bar.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
