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.
Lucid (LCID)
Market Cap: $6.62 billion
Founded by a former Tesla Vice President, Lucid Group (NASDAQ: LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.
Why Are We Cautious About LCID?
- Negative gross margin means it loses money on every sale and must pivot or scale quickly to survive
- Cash-burning history makes us doubt the long-term viability of its business model
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $2.16 per share, Lucid trades at 3.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than LCID.
Artivion (AORT)
Market Cap: $1.46 billion
Formerly known as CryoLife until its 2022 rebranding, Artivion (NYSE: AORT) develops and manufactures medical devices and preserves human tissues used in cardiac and vascular surgical procedures for patients with aortic disease.
Why Should You Dump AORT?
- Muted 7.2% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
- Smaller revenue base of $390.1 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Underwhelming 1.9% return on capital reflects management’s difficulties in finding profitable growth opportunities
Artivion is trading at $31.99 per share, or 46.2x forward P/E. To fully understand why you should be careful with AORT, check out our full research report (it’s free).
Bank of Hawaii (BOH)
Market Cap: $2.67 billion
Founded in 1897 as a financial anchor for the newly annexed Hawaiian territory, Bank of Hawaii (NYSE: BOH) is a financial institution providing banking, investment, and insurance services primarily to customers in Hawaii, Guam, and other Pacific Islands.
Why Do We Think Twice About BOH?
- Net interest income was flat over the last four years, indicating it’s failed to expand this cycle
- Net interest margin of 2.2% reflects its high servicing and capital costs
- Sales over the last five years were less profitable as its earnings per share fell by 6.8% annually while its revenue was flat
Bank of Hawaii’s stock price of $67.08 implies a valuation ratio of 1.8x forward P/B. Check out our free in-depth research report to learn more about why BOH doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 183% over the last five years (as of March 31st 2025).
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.
