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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Olo (OLO)

Market Cap: $1.49 billion

Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE: OLO) provides restaurants and food retailers with software to manage food orders and delivery.

Why Are We Hesitant About OLO?

1. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 54.7%, one of the worst among software companies
2. Rapid expansion strategy came at the expense of operating margin profitability
3. Low free cash flow margin of 7.4% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Olo is trading at $8.91 per share, or 4.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than OLO.

Trex (TREX)

Market Cap: $6.36 billion

Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.

Why Are We Cautious About TREX?

1. Annual revenue growth of 5.4% over the last two years was below our standards for the industrials sector
2. Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Trex’s stock price of $59.29 implies a valuation ratio of 26.8x forward P/E. Read our free research report to see why you should think twice about including TREX in your portfolio.

AXIS Capital (AXS)

Market Cap: $7.73 billion

Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE: AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.

Why Are We Wary of AXS?

1. 3.8% annual revenue growth over the last five years was slower than its insurance peers
2. 2.5% annual net premiums earned growth over the last two years was slower than its insurance peers
3. ROE of 9.5% reflects management’s challenges in identifying attractive investment opportunities

At $98.23 per share, AXIS Capital trades at 1.3x forward P/B. Check out our free in-depth research report to learn more about why AXS doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 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 Kadant (+351% 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