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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Edgewell Personal Care (EPC)
Market Cap: $1.28 billion
Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE: EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.
Why Do We Think EPC Will Underperform?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Operating margin declined by 7.3 percentage points over the last year as its sales cratered
- Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 6.8% annually, worse than its revenue
Edgewell Personal Care is trading at $27.31 per share, or 13.5x forward P/E. To fully understand why you should be careful with EPC, check out our full research report (it’s free).
Plug Power (PLUG)
Market Cap: $3.08 billion
Powering forklifts for Walmart’s distribution centers, Plug Power (NASDAQ: PLUG) provides hydrogen fuel cells used to power electric motors.
Why Does PLUG Fall Short?
- Annual sales declines of 3.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Plug Power’s stock price of $2.22 implies a valuation ratio of 3.8x forward price-to-sales. If you’re considering PLUG for your portfolio, see our FREE research report to learn more.
Banc of California (BANC)
Market Cap: $3.21 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Should You Sell BANC?
- Muted 2.5% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Costs have risen faster than its revenue over the last five years, causing its efficiency ratio to worsen by 17.2 percentage points
- Earnings per share fell by 19.4% annually over the last five years while its revenue was flat, showing each sale was less profitable
At $20.85 per share, Banc of California trades at 1x forward P/B. Dive into our free research report to see why there are better opportunities than BANC.
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
