3 Small-Cap Stocks with Open Questions

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. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Carriage Services (CSV)

Market Cap: $691.4 million

Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.

Why Are We Out on CSV?

1. 5.7% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Low free cash flow margin of 12.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Unchanged returns on capital make it difficult for the company’s valuation multiple to re-rate

Carriage Services is trading at $43.95 per share, or 13.1x forward P/E. Read our free research report to see why you should think twice about including CSV in your portfolio.

Xerox (XRX)

Market Cap: $334.2 million

Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ:XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.

Why Is XRX Risky?

1. Sales tumbled by 2.6% annually over the last five years, showing market trends are working against its favor during this cycle
2. Sales were less profitable over the last five years as its earnings per share fell by 15.6% annually, worse than its revenue declines
3. High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $2.64 per share, Xerox trades at 3.2x forward P/E. Dive into our free research report to see why there are better opportunities than XRX.

CNO Financial Group (CNO)

Market Cap: $3.93 billion

Rebranded from Conseco in 2010 to signal a fresh start after navigating financial challenges, CNO Financial Group (NYSE:CNO) develops and markets health insurance, annuities, and life insurance products primarily targeting middle-income pre-retirees and retirees.

Why Does CNO Worry Us?

1. Net premiums earned plateaued over the last five years, signaling weak incremental demand for its insurance policies
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.8%
3. Book value per share tumbled by 5.7% annually over the last five years, showing insurance sector trends are working against its favor during this cycle

CNO Financial Group’s stock price of $41.25 implies a valuation ratio of 1.5x forward P/B. Check out our free in-depth research report to learn more about why CNO doesn’t pass our bar.

Stocks We Like More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. 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-small-cap company Exlservice (+354% 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

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