3 Small-Cap Stocks That Concern Us

Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.

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 pass on and some alternatives you should look into instead.

Power Integrations (POWI)

Market Cap: $3.05 billion

A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ:POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.

Why Do We Think POWI Will Underperform?

1. Annual sales declines of 6.4% for the past five years show its products and services struggled to connect with the market during this cycle
2. Operating margin declined by 24.7 percentage points over the last five years as its sales cratered
3. Sales were less profitable over the last five years as its earnings per share fell by 14.1% annually, worse than its revenue declines

Power Integrations is trading at $56.18 per share, or 32.6x forward P/E. Read our free research report to see why you should think twice about including POWI in your portfolio.

ICF International (ICFI)

Market Cap: $1.58 billion

Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ:ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.

Why Do We Pass on ICFI?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.3% annually over the last two years
2. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 5.7% declines over the past two years
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

ICF International’s stock price of $89.20 implies a valuation ratio of 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than ICFI.

Lucid (LCID)

Market Cap: $2.07 billion

Founded by a former Tesla Vice President, Lucid Group (NASDAQ:LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.

Why Are We Cautious About LCID?

1. Cash burn makes us question whether it can achieve sustainable long-term growth
2. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $4.98 per share, Lucid trades at 0.9x forward price-to-sales. To fully understand why you should be careful with LCID, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

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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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.