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 swipe left on and some alternatives you should look into instead.
Universal Technical Institute (UTI)
Market Cap: $1.80 billion
Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.
Why Do We Think UTI Will Underperform?
- Operating margin of 7.8% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.7 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Universal Technical Institute is trading at $33.10 per share, or 14.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why UTI doesn’t pass our bar.
Enpro (NPO)
Market Cap: $3.82 billion
Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.
Why Are We Wary of NPO?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last five years
- Earnings per share have contracted by 2.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $181.56 per share, Enpro trades at 23.4x forward P/E. Read our free research report to see why you should think twice about including NPO in your portfolio.
CBIZ (CBZ)
Market Cap: $3.88 billion
With over 120 offices across 33 states and a team of more than 6,700 professionals, CBIZ (NYSE:CBZ) provides accounting, tax, benefits, insurance brokerage, and advisory services to help small and mid-sized businesses manage their finances and operations.
Why Does CBZ Fall Short?
- 10.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Underwhelming 10% return on capital reflects management’s difficulties in finding profitable growth opportunities
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
CBIZ’s stock price of $72.60 implies a valuation ratio of 19x forward P/E. To fully understand why you should be careful with CBZ, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free.