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.

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 avoid and some other investments you should consider instead.

Health Catalyst (HCAT)

Market Cap: $169.2 million

Built on its "Health Catalyst Flywheel" methodology that emphasizes measurable outcomes, Health Catalyst (NASDAQ:HCAT) provides data and analytics technology and services that help healthcare organizations manage their data and drive measurable clinical, financial, and operational improvements.

Why Should You Dump HCAT?

1. Offerings struggled to generate interest as its billings were flat over the last year

2. Sky-high servicing costs result in an inferior gross margin of 50.4% that must be offset through increased usage

3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

Health Catalyst's stock price of $2.29 implies a valuation ratio of 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including HCAT in your portfolio, it's free.

Park-Ohio (PKOH)

Market Cap: $498.4 million

Based in Cleveland, Park-Ohio (NASDAQ:PKOH) provides supply chain management services, capital equipment, and manufactured components.

Why Does PKOH Give Us Pause?

1. Sales tumbled by 1.2% annually over the last two years, showing market trends are working against it during this cycle

2. Earnings per share decreased by more than its revenue over the last two years, partly because it diluted shareholders

3. Cash-burning history makes us doubt the long-term viability of its business model

At $36.25 per share, Park-Ohio trades at 11.1x forward P/E. If you're considering PKOH for your portfolio, see our FREE research report to learn more.

Integer Holdings (ITGR)

Market Cap: $3.18 billion

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

Why Are We Hesitant About ITGR?

1. Subscale operations are evident in its revenue base of $1.86 billion, meaning it has fewer distribution channels than its larger rivals

2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue

3. ROIC of 5.4% reflects management's challenges in identifying attractive investment opportunities