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.
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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Mayville Engineering (MEC)
Market Cap: $360.2 million
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE: MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.
Why Are We Wary of MEC?
- Annual sales declines of 3.1% for the past two years show its products and services struggled to connect with the market during this cycle
- High input costs result in an inferior gross margin of 12.8% that must be offset through higher volumes
- Earnings per share have contracted by 52.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Mayville Engineering is trading at $17.71 per share, or 80.9x forward P/E. If you’re considering MEC for your portfolio, see our FREE research report to learn more.
Trex (TREX)
Market Cap: $3.92 billion
Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.
Why Do We Pass on TREX?
- 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 shrank by 6.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Trex’s stock price of $36.54 implies a valuation ratio of 23.9x forward P/E. Check out our free in-depth research report to learn more about why TREX doesn’t pass our bar.
Organon (OGN)
Market Cap: $2.13 billion
Spun off from Merck in 2021 to create a company dedicated to addressing unmet needs in women's health, Organon (NYSE: OGN) is a global healthcare company focused on improving women's health through prescription therapies, medical devices, biosimilars, and established medicines.
Why Does OGN Worry Us?
- Sales tumbled by 1.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 17.6% annually, worse than its revenue declines
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 24.8 percentage points
At $8.18 per share, Organon trades at 2.1x forward P/E. To fully understand why you should be careful with OGN, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
