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.
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.
Itron (ITRI)
Market Cap: $4.52 billion
Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ: ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.
Why Are We Cautious About ITRI?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1% annually over the last two years
- Poor expense management has led to an operating margin of 6.8% that is below the industry average
- Underwhelming 6.9% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $103.30 per share, Itron trades at 16.1x forward P/E. To fully understand why you should be careful with ITRI, check out our full research report (it’s free).
People (PPLI)
Market Cap: $2.97 billion
Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, People (NASDAQ: PPLI) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.
Why Do We Think PPLI Will Underperform?
- Sales tumbled by 6.4% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share have dipped by 18.6% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.7% for the last five years
People is trading at $39.94 per share, or 15.1x forward P/E. Read our free research report to see why you should think twice about including PPLI in your portfolio.
OceanFirst Financial (OCFC)
Market Cap: $1.88 billion
Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ: OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.
Why Are We Bearish on OCFC?
- 5.9% annual net interest income growth over the last five years was slower than its banking peers
- Operational productivity has decreased over the last five years as its efficiency ratio worsened by 20.5 percentage points
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 4.5% annually over the last two years
OceanFirst Financial’s stock price of $19.10 implies a valuation ratio of 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than OCFC.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
