3 Small-Cap Stocks That Fall Short

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.

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.

Werner (WERN)

Market Cap: $1.63 billion

Conducting business in over a 100 countries, Werner (NASDAQ:WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.

Why Is WERN Risky?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 4.8% annually over the last two years
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 67.1% annually
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $27.16 per share, Werner trades at 35.9x forward P/E. Read our free research report to see why you should think twice about including WERN in your portfolio.

Haemonetics (HAE)

Market Cap: $2.72 billion

With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE:HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.

Why Is HAE Not Exciting?

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. Modest revenue base of $1.32 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
3. ROIC of 6.6% reflects management’s challenges in identifying attractive investment opportunities

Haemonetics is trading at $58.58 per share, or 11.4x forward P/E. To fully understand why you should be careful with HAE, check out our full research report (it’s free).

Howard Hughes Holdings (HHH)

Market Cap: $3.65 billion

Named after the eccentric business magnate and aviator whose legacy lives on in real estate development, Howard Hughes Holdings (NYSE:HHH) develops, owns, and manages master-planned communities and commercial properties across the United States.

Why Should You Sell HHH?

1. Muted 21.5% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
2. Rising returns on capital show management is making relatively better investments
3. High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Howard Hughes Holdings’s stock price of $63.43 implies a valuation ratio of 2.2x forward price-to-sales. If you’re considering HHH for your portfolio, see our FREE research report to learn 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.