3 Small-Cap Stocks We’re Skeptical Of

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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Amtech (ASYS)

Market Cap: $165 million

Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ:ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.

Why Do We Pass on ASYS?

Products and services are facing significant end-market challenges during this cycle as sales have declined by 20.4% annually over the last two years Poor free cash flow margin of 6.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends Negative returns on capital show that some of its growth strategies have backfired, and its shrinking returns suggest its past profit sources are losing steam

Amtech’s stock price of $11.68 implies a valuation ratio of 2.3x trailing 12-month price-to-sales. Read our free research report to see why you should think twice about including ASYS in your portfolio, it’s free.

Marcus & Millichap (MMI)

Market Cap: $978.4 million

Founded in 1971, Marcus & Millichap (NYSE:MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.

Why Should You Sell MMI?

1% annual revenue growth over the last five years was slower than its consumer discretionary peers Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5% for the last two years Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Marcus & Millichap is trading at $25.72 per share, or 38.9x forward P/E. Dive into our free research report to see why there are better opportunities than MMI.

Fidelis Insurance (FIHL)

Market Cap: $1.62 billion

Founded in Bermuda in 2014 and designed to adapt nimbly to evolving market conditions, Fidelis Insurance (NYSE:FIHL) is a global specialty insurance and reinsurance company focused on creating value through strategic capital allocation, expert risk selection and a network of long-term underwriting partnerships.

Story Continues

Why Does FIHL Give Us Pause?

Expenses have increased as a percentage of revenue over the last two years as its pre-tax profit margin fell by 45.9 percentage points Incremental sales over the last two years were much less profitable as its earnings per share fell by 4.7% annually while its revenue grew Annual book value per share growth of 9.3% over the last two years was below our standards for the insurance sector

At $18.76 per share, Fidelis Insurance trades at 0.7x forward P/B. To fully understand why you should be careful with FIHL, check out our full research report (it’s free).

Stocks We Like More

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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.

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