3 Small-Cap Stocks We Keep Off Our Radar

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.

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 pass on and some alternatives you should look into instead.

Coty (COTY)

Market Cap: $2.49 billion

With a portfolio boasting many household brands, Coty (NYSE:COTY) is a beauty products powerhouse spanning cosmetics, fragrances, and skincare.

Why Should You Sell COTY?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Sales are projected to tank by 1.2% over the next 12 months as demand evaporates
3. Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 29.3% annually

Coty is trading at $2.82 per share, or 8.9x forward P/E. Check out our free in-depth research report to learn more about why COTY doesn’t pass our bar.

UFP Industries (UFPI)

Market Cap: $5.24 billion

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ:UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Why Do We Steer Clear of UFPI?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.4% annually over the last five years
2. Sales were less profitable over the last five years as its earnings per share fell by 8.3% annually, worse than its revenue declines
3. Eroding returns on capital suggest its historical profit centers are aging

At $92.74 per share, UFP Industries trades at 17.8x forward P/E. Read our free research report to see why you should think twice about including UFPI in your portfolio.

Purple (PRPL)

Market Cap: $40.31 million

Founded by two brothers, Purple (NASDAQ:PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.

Why Are We Out on PRPL?

1. Annual revenue declines of 8.4% over the last five years indicate problems with its market positioning
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Purple’s stock price of $9.23 implies a valuation ratio of 13.2x forward EV-to-EBITDA. If you’re considering PRPL for your portfolio, see our FREE research report to learn more.

Stocks We Like More

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.

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.