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 swipe left on and some alternatives you should look into instead.
Revolve (RVLV)
Market Cap: $1.36 billion
Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NYSE:RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.
Why Do We Think RVLV Will Underperform?
- May need to improve its platform and marketing strategy as its 5.8% average growth in active customers underwhelmed
- Excessive marketing spend signals little organic demand and traction for its platform
- Earnings per share lagged its peers over the last three years as they only grew by 7.5% annually
Revolve is trading at $18.90 per share, or 10.8x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than RVLV.
First Watch (FWRG)
Market Cap: $649.1 million
Based on a nautical reference to the first work shift aboard a ship, First Watch (NASDAQ:FWRG) is a chain of breakfast and brunch restaurants whose menu is heavily-focused on eggs and griddle items such as pancakes.
Why Is FWRG Not Exciting?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Cash burn makes us question whether it can achieve sustainable long-term growth
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $10.44 per share, First Watch trades at 52.2x forward P/E. If you’re considering FWRG for your portfolio, see our FREE research report to learn more.
AXIS Capital (AXS)
Market Cap: $6.97 billion
Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE:AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.
Why Are We Hesitant About AXS?
- Sales trends were unexciting over the last five years as its 6.8% annual growth was below the typical insurance company
- Growth in insurance policies was lackluster over the last five years as its 5.9% annual growth underperformed the typical financial institution
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 14.5% annually
AXIS Capital’s stock price of $94.57 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why AXS 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.