3 Small-Cap Stocks We Keep Off Our Radar

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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three small-cap stocks to avoid and some other investments you should consider instead.

Genesis Energy (GEL)

Market Cap: $1.92 billion

Operating a 64% stake in the Poseidon Pipeline, one of the Gulf of Mexico's largest crude oil pipelines, Genesis Energy (NYSE:GEL) provides midstream services like pipeline transportation, storage, and processing for crude oil and natural gas producers and refiners.

Why Is GEL Risky?

1. Sales tumbled by 1.5% annually over the last five years, showing market trends are working against it during this cycle
2. Gross margin of 25.3% reflects its high production costs and unfavorable asset base
3. High net-debt-to-EBITDA ratio of 6× could force the company to raise capital on unfavorable terms if market conditions deteriorate

At $14.47 per share, Genesis Energy trades at 1x forward price-to-sales. Check out our free in-depth research report to learn more about why GEL doesn’t pass our bar.

Inspired (INSE)

Market Cap: $218.2 million

Specializing in digital casino gaming, Inspired (NASDAQ:INSE) is a provider of gaming hardware, virtual sports platforms, and server-based gaming systems.

Why Do We Pass on INSE?

1. Annual revenue growth of 12.1% over the last five years was below our standards for the consumer discretionary sector
2. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Inspired’s stock price of $8 implies a valuation ratio of 27.2x forward P/E. Dive into our free research report to see why there are better opportunities than INSE.

Warby Parker (WRBY)

Market Cap: $3.17 billion

Founded in 2010, Warby Parker (NYSE:WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.

Why Does WRBY Fall Short?

1. Revenue base of $890.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Persistent operating margin losses suggest the business manages its expenses poorly
3. Negative returns on capital show management lost money while trying to expand the business

Warby Parker is trading at $26.07 per share, or 50.6x forward P/E. Check out our free in-depth research report to learn more about why WRBY doesn’t pass our bar.

Stocks We Like More

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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.