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.

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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Sally Beauty (SBH)

Market Cap: $825.8 million

Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE:SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.

Why Do We Avoid SBH?

1. Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency

2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

3. Modest revenue base of $3.72 billion gives it less fixed cost leverage and fewer distribution channels than larger companies

At $8.09 per share, Sally Beauty trades at 4.3x forward price-to-earnings. To fully understand why you should be careful with SBH, check out our full research report (it’s free) .

Jack in the Box (JACK)

Market Cap: $437.7 million

Delighting customers since its inception in 1951, Jack in the Box (NASDAQ:JACK) is a distinctive fast-food chain known for its bold flavors, innovative menu items, and quirky marketing.

Why Are We Wary of JACK?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants

2. Efficiency has decreased over the last year as its operating margin fell by 10.6 percentage points

3. 10× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Jack in the Box is trading at $23.22 per share, or 4.2x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than JACK .

Matrix Service (MTRX)

Market Cap: $299.8 million

Founded in Oklahoma, Matrix Service (NASDAQ:MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.

Why Do We Think MTRX Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.9% annually over the last five years

2. Gross margin of 4.4% is below its competitors, leaving less money to invest in areas like marketing and R&D

3. Issuance of new shares over the last five years caused its earnings per share to fall by 22.5% annually, even worse than its revenue declines