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

Carter's (CRI)

Market Cap: $1.27 billion

Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE: CRI) is an American designer and marketer of children's apparel.

Why Are We Out on CRI?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Low free cash flow margin of 5.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $34.83 per share, Carter's trades at 11.3x forward P/E. To fully understand why you should be careful with CRI, check out our full research report (it’s free).

Texas Capital Bank (TCBI)

Market Cap: $4.10 billion

Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ: TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.

Why Does TCBI Fall Short?

1. Annual net interest income growth of 3.9% over the last five years was below our standards for the banking sector
2. Projected net interest income growth of 4.2% for the next 12 months suggests sluggish demand
3. Low return on equity reflects management’s struggle to allocate funds effectively

Texas Capital Bank’s stock price of $92.64 implies a valuation ratio of 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than TCBI.

Community Bank (CBU)

Market Cap: $2.98 billion

Tracing its roots back to 1866 in upstate New York, Community Financial System (NYSE: CBU) is a financial holding company that provides banking, employee benefits, wealth management, and insurance services to retail, commercial, and municipal customers.

Why Are We Wary of CBU?

1. 6.6% annual net interest income growth over the last five years was slower than its banking peers
2. Performance over the past five years shows its incremental sales were less profitable, as its 4.8% annual earnings per share growth trailed its revenue gains
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3% annually over the last five years

Community Bank is trading at $56.81 per share, or 1.4x forward P/B. If you’re considering CBU for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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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.