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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Teradata (TDC)
Market Cap: $2.57 billion
Pioneering data warehousing technology in the 1980s before "big data" was a common term, Teradata (NYSE: TDC) provides cloud-based data analytics and AI platforms that help large enterprises integrate, analyze, and leverage their data across multiple environments.
Why Do We Pass on TDC?
- Billings have dropped by 4.4% over the last year, suggesting it might have to lower prices to stimulate growth
- Sky-high servicing costs result in an inferior gross margin of 59.4% that must be offset through increased usage
- Static operating margin over the last year shows it couldn’t become more efficient
Teradata’s stock price of $27.96 implies a valuation ratio of 1.6x forward price-to-sales. If you’re considering TDC for your portfolio, see our FREE research report to learn more.
CONMED (CNMD)
Market Cap: $1.36 billion
With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE: CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.
Why Does CNMD Give Us Pause?
- Annual revenue growth of 7.4% over the last two years was below our standards for the healthcare sector
- Smaller revenue base of $1.35 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- ROIC of 5.2% reflects management’s challenges in identifying attractive investment opportunities
CONMED is trading at $43.97 per share, or 9.4x forward P/E. Check out our free in-depth research report to learn more about why CNMD doesn’t pass our bar.
Grid Dynamics (GDYN)
Market Cap: $747.7 million
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Is GDYN Not Exciting?
- Revenue base of $406 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 6.7 percentage points
- Push for growth has led to negative returns on capital, signaling value destruction
At $8.96 per share, Grid Dynamics trades at 20.6x forward P/E. Dive into our free research report to see why there are better opportunities than GDYN.
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 5 Growth Stocks for this month. 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 Kadant (+351% 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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