Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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 pass on and some alternatives you should look into instead.
Oxford Industries (OXM)
Market Cap: $390 million
The parent company of Tommy Bahama, Oxford Industries (NYSE:OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.
Why Do We Pass on OXM?
- 8.2% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Poor free cash flow margin of 2.3% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Oxford Industries is trading at $25.36 per share, or 11.4x forward P/E. If you’re considering OXM for your portfolio, see our FREE research report to learn more.
Hertz (HTZ)
Market Cap: $659.4 million
Started with a dozen Model T Fords, Hertz (NASDAQ:HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Do We Steer Clear of HTZ?
- Sales tumbled by 2.2% annually over the last two years, showing market trends are working against it during this cycle
- Diminishing returns on capital suggest its earlier profit pools are drying up
Hertz’s stock price of $1.84 implies a valuation ratio of 46.4x forward EV-to-EBITDA. To fully understand why you should be careful with HTZ, check out our full research report (it’s free).
S&T Bancorp (STBA)
Market Cap: $1.69 billion
Tracing its roots back to 1902 in western Pennsylvania's industrial heartland, S&T Bancorp (NASDAQ:STBA) is a Pennsylvania-based bank holding company that provides retail and commercial banking services, cash management, trust services, and investment advisory solutions.
Why Are We Bearish on STBA?
- Net interest income trends were unexciting over the last five years as its 5.2% annual growth was below the typical banking firm
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4%
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.2% annually
At $47.98 per share, S&T Bancorp trades at 1.2x forward P/B. Read our free research report to see why you should think twice about including STBA in your portfolio.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.