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 avoid and some other investments you should consider instead.
Park-Ohio (PKOH)
Market Cap: $423.2 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Are We Wary of PKOH?
- Annual sales declines of 1.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Issuance of new shares over the last two years caused its earnings per share to fall by 8.3% annually, even worse than its revenue declines
- Negative free cash flow raises questions about the return timeline for its investments
At $30.68 per share, Park-Ohio trades at 0.3x trailing 12-month price-to-sales. To fully understand why you should be careful with PKOH, check out our full research report (it’s free).
Credit Acceptance (CACC)
Market Cap: $5.46 billion
Founded in 1972 by Donald Foss to serve customers overlooked by traditional lenders, Credit Acceptance (NASDAQ: CACC) provides auto financing solutions that enable car dealers to sell vehicles to consumers with limited or impaired credit histories.
Why Should You Dump CACC?
- Annual revenue growth of 2.7% over the last five years was below our standards for the financials sector
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
Credit Acceptance is trading at $522.15 per share, or 10.8x forward P/E. Read our free research report to see why you should think twice about including CACC in your portfolio.
QCR Holdings (QCRH)
Market Cap: $1.48 billion
With roots dating back to 1993 and a name reflecting its original Quad Cities market, QCR Holdings (NASDAQGM:QCRH) operates four community banks across Iowa and Missouri, providing commercial, consumer banking, and trust services to businesses and individuals.
Why Do We Think Twice About QCRH?
- Annual net interest income growth of 8.9% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 4.9% for the next 12 months implies demand will slow from its five-year trend
- Costs have risen faster than its revenue over the last five years, causing its efficiency ratio to worsen by 6.3 percentage points
QCR Holdings’s stock price of $89.74 implies a valuation ratio of 1.2x forward P/B. If you’re considering QCRH for your portfolio, see our FREE research report to learn more.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month - FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
