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 avoid and some other investments you should consider instead.
Paramount (PARA)
Market Cap: $8.40 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Do We Steer Clear of PARA?
- Annual revenue declines of 2.3% over the last two years indicate problems with its market positioning
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 23.5% annually
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Paramount is trading at $11.81 per share, or 7.9x forward P/E. To fully understand why you should be careful with PARA, check out our full research report (it’s free).
Silgan Holdings (SLGN)
Market Cap: $5.82 billion
Established in 1987, Silgan Holdings (NYSE:SLGN) is a supplier of rigid packaging for consumer goods products, specializing in metal containers, closures, and plastic packaging.
Why Is SLGN Risky?
- Annual sales declines of 3% for the past two years show its products and services struggled to connect with the market during this cycle
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Silgan Holdings’s stock price of $54.38 implies a valuation ratio of 13.1x forward P/E. Read our free research report to see why you should think twice about including SLGN in your portfolio.
Enovis (ENOV)
Market Cap: $2.07 billion
With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE:ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.
Why Do We Avoid ENOV?
- Sales tumbled by 9.1% annually over the last five years, showing market trends are working against its favor during this cycle
- Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $36.22 per share, Enovis trades at 11x forward P/E. Dive into our free research report to see why there are better opportunities than ENOV.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free.