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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
LKQ (LKQ)
Market Cap: $8.50 billion
A global distributor of vehicle parts and accessories, LKQ (NASDAQ:LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Why Do We Think LKQ Will Underperform?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin is not anticipated to grow over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $33.17 per share, LKQ trades at 10.6x forward P/E. If you’re considering LKQ for your portfolio, see our FREE research report to learn more.
Surgery Partners (SGRY)
Market Cap: $2.09 billion
With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ:SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.
Why Does SGRY Worry Us?
- Weak unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Low free cash flow margin of 4.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Surgery Partners’s stock price of $16.52 implies a valuation ratio of 26x forward P/E. Read our free research report to see why you should think twice about including SGRY in your portfolio.
Hope Bancorp (HOPE)
Market Cap: $1.45 billion
With roots in serving Korean-American communities and now expanded to a multi-ethnic clientele across 12 states, Hope Bancorp (NASDAQ:HOPE) operates Bank of Hope, providing commercial and retail banking services with a focus on serving multi-ethnic communities across the United States.
Why Do We Pass on HOPE?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Flat net interest income over the last five years suggest it must find different ways to grow during this cycle
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 4% annually
Hope Bancorp is trading at $11.29 per share, or 0.7x forward P/B. To fully understand why you should be careful with HOPE, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.