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.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

European Wax Center (EWCZ)

Market Cap: $182.9 million

Founded by two siblings, European Wax Center (NASDAQ:EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.

Why Should You Sell EWCZ?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Projected sales decline of 1.4% for the next 12 months points to a tough demand environment ahead
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

At $4.17 per share, European Wax Center trades at 13.7x forward P/E. If you’re considering EWCZ for your portfolio, see our FREE research report to learn more.

Avis Budget Group $(CAR.UK)$

Market Cap: $5.52 billion

The parent company of brands such as Zipcar and Budget Truck Rental, Avis $(CAR)$ is a provider of car rental and mobility solutions.

Why Is CAR Risky?

1. Sluggish trends in its available rental days - car rental suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Avis Budget Group is trading at $154.26 per share, or 11.3x forward P/E. To fully understand why you should be careful with CAR, check out our full research report (it’s free).

Integer Holdings (ITGR)

Market Cap: $3.70 billion

With its name reflecting the mathematical term for "whole" or "complete," Integer Holdings $(ITGR)$ is a medical device outsource manufacturer that produces components and systems for cardiac, vascular, neurological, and other medical applications.

Why Is ITGR Not Exciting?

1. Modest revenue base of $1.79 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Free cash flow margin dropped by 5.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Integer Holdings’s stock price of $106.87 implies a valuation ratio of 15.7x forward P/E. Check out our free in-depth research report to learn more about why ITGR doesn’t pass our bar.

Stocks We Like More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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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