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 swipe left on and some alternatives you should look into instead.
Mohawk Industries (MHK)
Market Cap: $7.17 billion
Established in 1878, Mohawk Industries (NYSE: MHK) is a leading producer of floor-covering products for both residential and commercial applications.
Why Do We Avoid MHK?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin is expected to remain in place over the coming year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $115.49 per share, Mohawk Industries trades at 11.6x forward P/E. To fully understand why you should be careful with MHK, check out our full research report (it’s free for active Edge members).
Enovis (ENOV)
Market Cap: $1.73 billion
With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE: ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.
Why Is ENOV Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.5% annually over the last five years
- Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Enovis is trading at $30.28 per share, or 9.3x forward P/E. Read our free research report to see why you should think twice about including ENOV in your portfolio.
Lincoln Financial Group (LNC)
Market Cap: $7.81 billion
Founded in 1905 by a group of Fort Wayne, Indiana businessmen who named the company after Abraham Lincoln, Lincoln National Corporation (NYSE: LNC) provides insurance, retirement plans, and wealth management products through its subsidiaries, operating under four main segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services.
Why Do We Think LNC Will Underperform?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Net premiums earned remained stagnant over the last five years, indicating expansion challenges this cycle
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 14.9% annually over the last five years
Lincoln Financial Group’s stock price of $41.14 implies a valuation ratio of 0.8x forward P/B. If you’re considering LNC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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