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. That said, here are three small-cap stocks to avoid and some other investments you should consider instead.
America's Car-Mart (CRMT)
Market Cap: $213.3 million
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.
Why Should You Sell CRMT?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Revenue growth over the past three years was nullified by the company’s new share issuances as its earnings per share fell by 74.7% annually
At $25.79 per share, America's Car-Mart trades at 70.4x forward P/E. Dive into our free research report to see why there are better opportunities than CRMT.
Lincoln Educational (LINC)
Market Cap: $843.1 million
Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Do We Avoid LINC?
- Performance surrounding its enrolled students has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Lincoln Educational’s stock price of $26.72 implies a valuation ratio of 34.3x forward P/E. If you’re considering LINC for your portfolio, see our FREE research report to learn more.
Taboola (TBLA)
Market Cap: $1.15 billion
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ:TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Are We Wary of TBLA?
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 1.3 percentage points
- Earnings per share have contracted by 25.3% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Negative returns on capital show that some of its growth strategies have backfired
Taboola is trading at $4.04 per share, or 9.4x forward P/E. Read our free research report to see why you should think twice about including TBLA in your portfolio.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 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.