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 swipe left on and some alternatives you should look into instead.
Bandwidth (BAND)
Market Cap: $407.8 million
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Are We Hesitant About BAND?
- Revenue increased by 12.9% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Sky-high servicing costs result in an inferior gross margin of 38.8% that must be offset through increased usage
- Operating margin expanded by 2.2 percentage points over the last year as it scaled and became more efficient
Bandwidth is trading at $13.32 per share, or 0.5x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free).
Red Rock Resorts (RRR)
Market Cap: $3.76 billion
Founded in 1976, Red Rock Resorts (NASDAQ: RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.
Why Should You Sell RRR?
- 9% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Free cash flow margin is forecasted to shrink by 4.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Unchanged returns on capital make it difficult for the company’s valuation multiple to re-rate
Red Rock Resorts’s stock price of $63.22 implies a valuation ratio of 25.5x forward P/E. Read our free research report to see why you should think twice about including RRR in your portfolio.
ANI Pharmaceuticals (ANIP)
Market Cap: $1.67 billion
With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ: ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.
Why Is ANIP Not Exciting?
- Smaller revenue base of $826.9 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 4.5 percentage points
- Push for growth has led to negative returns on capital, signaling value destruction
At $79.84 per share, ANI Pharmaceuticals trades at 10.3x forward P/E. Dive into our free research report to see why there are better opportunities than ANIP.
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 5 Strong Momentum Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
