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.
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 avoid and some other investments you should consider instead.
MGP Ingredients (MGPI)
Market Cap: $561.3 million
Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry
Why Is MGPI Risky?
- Annual sales declines of 8.6% for the past three years show its products struggled to connect with the market
- Projected sales decline of 12% over the next 12 months indicates demand will continue deteriorating
- Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
MGP Ingredients’s stock price of $26.24 implies a valuation ratio of 10.6x forward P/E. If you’re considering MGPI for your portfolio, see our FREE research report to learn more.
Owens Corning (OC)
Market Cap: $9.57 billion
Credited with the discovery of fiberglass, Owens Corning (NYSE: OC) supplies building and construction materials to the United States and international markets.
Why Do We Think OC Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 13.6 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Owens Corning is trading at $116.97 per share, or 11.4x forward P/E. Read our free research report to see why you should think twice about including OC in your portfolio.
OFG Bancorp (OFG)
Market Cap: $1.84 billion
Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE: OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.
Why Are We Cautious About OFG?
- 9.2% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 1.4% for the next 12 months implies demand will slow from its five-year trend
- 69.7 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
At $41.81 per share, OFG Bancorp trades at 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than OFG.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
