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.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Red Rock Resorts (RRR)

Market Cap: $2.58 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 Dump RRR?

1. Sales stagnated over the last five years and signal the need for new growth strategies
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 9.5 percentage points over the next year

Red Rock Resorts’s stock price of $43.37 implies a valuation ratio of 21.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why RRR doesn’t pass our bar.

Guardant Health (GH)

Market Cap: $5.26 billion

Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ:GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.

Why Does GH Give Us Pause?

1. Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 19% annually
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Guardant Health is trading at $42.60 per share, or 6.2x forward price-to-sales. Read our free research report to see why you should think twice about including GH in your portfolio, it’s free.

Alight (ALIT)

Market Cap: $3.16 billion

Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE:ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.

Why Do We Avoid ALIT?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 1% annually over the last five years
2. Earnings per share have dipped by 2.3% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $5.93 per share, Alight trades at 9.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ALIT.

Stocks We Like More

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Get started by checking out our Top 9 Market-Beating Stocks. 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.