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.
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.
Zeta (ZETA)
Market Cap: $3.43 billion
Co-founded by former Apple CEO John Sculley, Zeta Global (NYSE:ZETA) provides software and data analytics tools that help companies market their products to billions of customers.
Why Does ZETA Fall Short?
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Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 97% net revenue retention rate
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Gross margin of 60.3% reflects its relatively high servicing costs
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Historical operating losses show it had an inefficient cost structure while scaling
Zeta is trading at $14.85 per share, or 2.9x forward price-to-sales. Check out our free in-depth research report to learn more about why ZETA doesn’t pass our bar .
Steven Madden (SHOO)
Market Cap: $1.81 billion
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
Why Are We Hesitant About SHOO?
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Lackluster 3.7% annual revenue growth over the last two years indicates the company is losing ground to competitors
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Earnings per share lagged its peers over the last five years as they only grew by 6.8% annually
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Poor free cash flow margin of 9% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $25.30 per share, Steven Madden trades at 9.8x forward price-to-earnings. Read our free research report to see why you should think twice about including SHOO in your portfolio, it’s free .
Knight-Swift Transportation (KNX)
Market Cap: $7.19 billion
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE:KNX) offers less-than-truckload and full truckload delivery services.
Why Are We Out on KNX?
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Flat sales over the last two years suggest it must find different ways to grow during this cycle
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Free cash flow margin dropped by 8.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
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Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Knight-Swift Transportation’s stock price of $45 implies a valuation ratio of 22.2x forward price-to-earnings. To fully understand why you should be careful with KNX, check out our full research report (it’s free) .
Stocks We Like More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free .
