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.
Wix (WIX)
Market Cap: $5.62 billion
Powering over 263 million registered users worldwide with its AI-driven tools, Wix (NASDAQ:WIX) provides a cloud-based platform that helps individuals and businesses create and manage professional websites without requiring coding skills.
Why Do We Think Twice About WIX?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 13.7% underwhelmed
- Operating margin expanded by 1.9 percentage points over the last year as it scaled and became more efficient
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.8 percentage points over the next year
At $102.78 per share, Wix trades at 2.7x forward price-to-sales. Check out our free in-depth research report to learn more about why WIX doesn’t pass our bar.
Knowles (KN)
Market Cap: $2.05 billion
With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles (NYSE:KN) designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.
Why Should You Sell KN?
- Sales tumbled by 3.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Modest revenue base of $573.5 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Earnings per share lagged its peers over the last two years as they only grew by 5.3% annually
Knowles’s stock price of $24.04 implies a valuation ratio of 19.8x forward P/E. Dive into our free research report to see why there are better opportunities than KN.
Butterfield Bank (NTB)
Market Cap: $2.08 billion
Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE:NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.
Why Is NTB Not Exciting?
- 1.6% annual revenue growth over the last two years was slower than its banking peers
- Forecasted net interest income decline of 43% for the upcoming 12 months implies demand will fall off a cliff
- Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable
Butterfield Bank is trading at $51.22 per share, or 1.8x forward P/B. To fully understand why you should be careful with NTB, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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