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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Carriage Services (CSV)
Market Cap: $683.3 million
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Do We Pass on CSV?
- Sales trends were unexciting over the last five years as its 4.8% annual growth was below the typical consumer discretionary company
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Carriage Services is trading at $43.08 per share, or 12.6x forward P/E. Check out our free in-depth research report to learn more about why CSV doesn’t pass our bar.
Greenbrier (GBX)
Market Cap: $1.61 billion
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE: GBX) supplies the freight rail transportation industry with railcars and related services.
Why Does GBX Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.2% annually over the last two years
- High input costs result in an inferior gross margin of 14% that must be offset through higher volumes
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Greenbrier’s stock price of $52.20 implies a valuation ratio of 13.4x forward P/E. To fully understand why you should be careful with GBX, check out our full research report (it’s free).
Tandem Diabetes (TNDM)
Market Cap: $1.67 billion
With technology that automatically adjusts insulin delivery based on continuous glucose monitoring data, Tandem Diabetes Care (NASDAQ: TNDM) develops and manufactures automated insulin delivery systems that help people with diabetes manage their blood glucose levels.
Why Do We Avoid TNDM?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 18.5% annually while its revenue grew
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Negative earnings profile makes it challenging to secure favorable financing terms from lenders
At $24.69 per share, Tandem Diabetes trades at 31.5x forward EV-to-EBITDA. If you’re considering TNDM for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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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.
