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.
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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.
Shoe Carnival (SCVL)
Market Cap: $499.3 million
Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ: SCVL) is a retailer that sells footwear from mainstream brands for the entire family.
Why Do We Pass on SCVL?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Subscale operations are evident in its revenue base of $1.14 billion, meaning it has fewer distribution channels than its larger rivals
- Sales were less profitable over the last three years as its earnings per share fell by 18.6% annually, worse than its revenue declines
Shoe Carnival’s stock price of $18.15 implies a valuation ratio of 11.3x forward P/E. If you’re considering SCVL for your portfolio, see our FREE research report to learn more.
National Bank Holdings (NBHC)
Market Cap: $1.48 billion
Operating under familiar local brands like Community Banks of Colorado, Bank Midwest, and Bank of Jackson Hole, National Bank Holdings (NYSE: NBHC) operates regional banks across Colorado, Kansas, Missouri, Wyoming, Texas, and other western states, offering commercial, business, and consumer banking services.
Why Do We Avoid NBHC?
- Annual sales declines of 1.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Sales were less profitable over the last two years as its earnings per share fell by 6.5% annually, worse than its revenue declines
- Estimated tangible book value per share growth of 4.5% for the next 12 months implies profitability will slow from its two-year trend
National Bank Holdings is trading at $39.08 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why NBHC doesn’t pass our bar.
Independent Bank (INDB)
Market Cap: $3.75 billion
Tracing its roots back to 1907 and serving as a financial cornerstone in New England for over a century, Independent Bank Corp. (NASDAQ: INDB) operates as the holding company for Rockland Trust, providing banking, investment, and financial services across Eastern Massachusetts and Rhode Island.
Why Do We Think INDB Will Underperform?
- 1.6% annual revenue growth over the last two years was slower than its banking peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 6.9% annually while its revenue grew
- Capital trends were unexciting over the last two years as its 4.6% annual tangible book value per share growth was below the typical banking firm
At $75.72 per share, Independent Bank trades at 1x forward P/B. Dive into our free research report to see why there are better opportunities than INDB.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 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 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.
