Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Freshpet (FRPT)

Market Cap: $4.32 billion

Standing out from typical processed pet foods, Freshpet (NASDAQ:FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.

Why Are We Hesitant About FRPT?

1. Revenue base of $975.2 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale

2. Cash burn makes us question whether it can achieve sustainable long-term growth

3. Negative returns on capital show that some of its growth strategies have backfired

Freshpet is trading at $88.33 per share, or 31.9x forward price-to-earnings. To fully understand why you should be careful with FRPT, check out our full research report (it’s free) .

G-III (GIII)

Market Cap: $1.21 billion

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

Why Do We Pass on GIII?

1. Flat sales over the last two years suggest it must innovate and find new ways to grow

2. Estimated sales decline of 1.2% for the next 12 months implies an even more challenging demand environment

3. Underwhelming 7.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $27.66 per share, G-III trades at 6.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why GIII doesn’t pass our bar .

Gates Industrial Corporation (GTES)

Market Cap: $5.12 billion

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE:GTES) offers power transmission and fluid transfer equipment for various industries.

Why Does GTES Give Us Pause?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Sales are projected to be flat over the next 12 months and imply weak demand

3. Low returns on capital reflect management’s struggle to allocate funds effectively

Gates Industrial Corporation’s stock price of $20.06 implies a valuation ratio of 13.3x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GTES .

Stocks We Like More

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