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.

The RealReal (REAL)

Market Cap: $627.7 million

Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.

Why Are We Cautious About REAL?

1. Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 5.5% annually
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $5.49 per share, The RealReal trades at 22.2x forward EV/EBITDA. Check out our free in-depth research report to learn more about why REAL doesn’t pass our bar.

Newmark (NMRK)

Market Cap: $2.04 billion

Founded in 1929, Newmark (NASDAQ: NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.

Why Do We Steer Clear of NMRK?

1. 4.9% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Newmark is trading at $11.04 per share, or 7.8x forward P/E. Read our free research report to see why you should think twice about including NMRK in your portfolio.

FARO (FARO)

Market Cap: $813.3 million

Launched by two PhD students in a garage, FARO (NASDAQ: FARO) provides 3D measurement and imaging systems for the manufacturing, construction, engineering, and public safety industries.

Why Do We Think Twice About FARO?

1. Annual sales declines of 1.5% for the past five years show its products and services struggled to connect with the market during this cycle
2. Suboptimal cost structure is highlighted by its history of operating margin losses
3. Cash burn makes us question whether it can achieve sustainable long-term growth

FARO’s stock price of $42.49 implies a valuation ratio of 38.1x forward P/E. To fully understand why you should be careful with FARO, check out our full research report (it’s free).

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.