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.
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.
Arhaus (ARHS)
Market Cap: $1.49 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Does ARHS Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Revenue base of $1.36 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Revenue growth over the past three years was nullified by the company’s new share issuances as its earnings per share fell by 13.8% annually
At $10.30 per share, Arhaus trades at 22.5x forward P/E. If you’re considering ARHS for your portfolio, see our FREE research report to learn more.
GATX (GATX)
Market Cap: $5.91 billion
Originally founded to ship beer, GATX (NYSE:GATX) provides leasing and management services for railcars and other transportation assets globally.
Why Are We Wary of GATX?
- Performance surrounding its active railcars has lagged its peers
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
GATX is trading at $165.68 per share, or 16.8x forward P/E. Read our free research report to see why you should think twice about including GATX in your portfolio.
Selective Insurance Group (SIGI)
Market Cap: $4.71 billion
Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ:SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.
Why Should You Dump SIGI?
- Annual sales declines of 10.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Forecasted revenue decline of 25.3% for the upcoming 12 months implies demand will fall even further
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.2% annually
Selective Insurance Group’s stock price of $78.05 implies a valuation ratio of 1.4x forward P/B. Check out our free in-depth research report to learn more about why SIGI doesn’t pass our bar.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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