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.
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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Vontier (VNT)
Market Cap: $5.8 billion
A spin-off of a spin-off, Vontier (NYSE: VNT) provides electronic products and systems to the transportation, automotive, and manufacturing sectors.
Why Do We Steer Clear of VNT?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Projected sales growth of 1.6% for the next 12 months suggests sluggish demand
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
Vontier is trading at $40.97 per share, or 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than VNT.
Bausch + Lomb (BLCO)
Market Cap: $6.36 billion
With a nearly 170-year history dedicated to vision care and eye health innovation, Bausch + Lomb (NYSE: BLCO) develops and manufactures a comprehensive range of eye health products including contact lenses, pharmaceuticals, surgical devices, and consumer eye care solutions.
Why Are We Cautious About BLCO?
- Earnings per share have contracted by 100% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
- Free cash flow margin shrank by 19.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $18 per share, Bausch + Lomb trades at 22.8x forward P/E. Read our free research report to see why you should think twice about including BLCO in your portfolio.
Novavax (NVAX)
Market Cap: $1.49 billion
Pioneering a nanoparticle technology that mimics the molecular structure of disease pathogens, Novavax (NASDAQ: NVAX) develops and commercializes protein-based vaccines for infectious diseases, with a primary focus on its COVID-19 vaccine and combination respiratory vaccine candidates.
Why Does NVAX Give Us Pause?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Projected sales decline of 52% for the next 12 months points to an even tougher demand environment ahead
- Free cash flow margin shrank by 73.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Novavax’s stock price of $9.19 implies a valuation ratio of 2.9x forward price-to-sales. If you’re considering NVAX for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
