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.

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.

Vishay Intertechnology (VSH)

Market Cap: $4.80 billion

Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE: VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.

Why Do We Pass on VSH?

1. Muted 3% annual revenue growth over the last two years shows its demand lagged behind its semiconductor peers
2. Earnings per share fell by 28.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Cash-burning history and the downward spiral in its margin profile make us wonder if it has a viable business model

Vishay Intertechnology is trading at $31.05 per share, or 22.8x forward P/E. Dive into our free research report to see why there are better opportunities than VSH.

Employers Holdings (EIG)

Market Cap: $883.1 million

With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE: EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.

Why Do We Avoid EIG?

1. Net premiums earned plateaued over the last two years, signaling weak incremental demand for its insurance policies
2. Efficiency has decreased over the last five years as its pre-tax profit margin fell by 24.5 percentage points
3. Earnings per share fell by 22.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

At $49.17 per share, Employers Holdings trades at 1x forward P/B. To fully understand why you should be careful with EIG, check out our full research report (it’s free).

NESR (NESR)

Market Cap: $3.41 billion

Operating across 16 countries from Algeria to Indonesia, NESR (NASDAQ: NESR) provides oilfield services like hydraulic fracturing, cementing, and drilling to oil and gas companies.

Why Do We Think Twice About NESR?

1. Revenue base of $1.62 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Gross margin of 12.8% is below its competitors, leaving less money to invest in exploration and production
3. Expenses have increased as a percentage of revenue over the last five years as its EBITDA margin fell by 74.1 percentage points

NESR’s stock price of $33.72 implies a valuation ratio of 14.8x forward P/E. Read our free research report to see why you should think twice about including NESR in your portfolio.

Stocks We Like More

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.