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.

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.

Upstart (UPST)

Market Cap: $5.20 billion

Founded by the former head of Google's enterprise business, Upstart (NASDAQ:UPST) is an AI-powered lending platform facilitating loans for banks and consumers.

Why Is UPST Not Exciting?

1. Sales tumbled by 9.1% annually over the last three years, showing industry trends like AI are working against its favor
2. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
3. High net-debt-to-EBITDA ratio of 182× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Upstart’s stock price of $55.50 implies a valuation ratio of 5.1x forward price-to-sales. Check out our free in-depth research report to learn more about why UPST doesn’t pass our bar.

VF Corp (VFC)

Market Cap: $8.01 billion

Owner of The North Face, Vans, and Supreme, VF Corp (NYSE:VFC) is a clothing conglomerate specializing in branded lifestyle apparel, footwear, and accessories.

Why Do We Avoid VFC?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $20.64 per share, VF Corp trades at 22.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than VFC.

Hyster-Yale Materials Handling (HY)

Market Cap: $794.1 million

Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE:HY) designs, manufactures, and sells materials handling equipment to various sectors.

Why Do We Think Twice About HY?

1. 5.5% annual revenue growth over the last five years was slower than its industrials peers
2. Estimated sales decline of 5.4% for the next 12 months implies a challenging demand environment
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Hyster-Yale Materials Handling is trading at $44.85 per share, or 8.4x forward price-to-earnings. Read our free research report to see why you should think twice about including HY in your portfolio, it’s free.

Stocks We Like More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.