3 Small-Cap Stocks with Warning Signs

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?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Subscale operations are evident in its revenue base of $1.14 billion, meaning it has fewer distribution channels than its larger rivals
3. 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?

1. 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
2. Sales were less profitable over the last two years as its earnings per share fell by 6.5% annually, worse than its revenue declines
3. 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. 1.6% annual revenue growth over the last two years was slower than its banking peers
2. 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
3. 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.