3 Small-Cap Stocks We Keep Off Our Radar
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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Hyster-Yale Materials Handling (HY)
Market Cap: $647.3 million
Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE:HY) designs, manufactures, and sells materials handling equipment to various sectors.
Why Should You Sell HY?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.3% annually over the last two years
- Low free cash flow margin of -0.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Hyster-Yale Materials Handling is trading at $35.78 per share, or 19.1x forward EV-to-EBITDA. If you’re considering HY for your portfolio, see our FREE research report to learn more.
Dave & Buster's (PLAY)
Market Cap: $494.7 million
Founded by a former game parlor and bar operator, Dave & Buster’s (NASDAQ:PLAY) operates a chain of arcades providing immersive entertainment experiences.
Why Do We Think PLAY Will Underperform?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $14.37 per share, Dave & Buster's trades at 8.3x forward EV-to-EBITDA. To fully understand why you should be careful with PLAY, check out our full research report (it’s free).
EVgo (EVGO)
Market Cap: $299.9 million
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ:EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Is EVGO Not Exciting?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- 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
EVgo’s stock price of $2.13 implies a valuation ratio of 32.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including EVGO in your portfolio.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
