3 Small-Cap Stocks with Questionable Fundamentals

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.

CoreCivic (CXW)

Market Cap: $1.87 billion

Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE:CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.

Why Are We Hesitant About CXW?

1. Muted 3% annual revenue growth over the last five years shows its demand lagged behind its business services peers
2. Free cash flow margin dropped by 10.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. ROIC of 5.9% reflects management’s challenges in identifying attractive investment opportunities

CoreCivic is trading at $18.70 per share, or 11.7x forward P/E. Read our free research report to see why you should think twice about including CXW in your portfolio.

FirstSun Capital Bancorp (FSUN)

Market Cap: $1.11 billion

Tracing its roots back to 1892 when it first opened its doors in Kansas, FirstSun Capital Bancorp (NASDAQ:FSUN) operates Sunflower Bank, providing commercial and consumer banking services to businesses and individuals across the Southwest region.

Why Are We Wary of FSUN?

1. Sales trends were unexciting over the last two years as its 5.5% annual growth was below the typical banking company
2. Net interest margin shrank by 20.8 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
3. Forecasted tangible book value per share decline of 3.3% for the upcoming 12 months implies profitability will deteriorate significantly

FirstSun Capital Bancorp’s stock price of $39.61 implies a valuation ratio of 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than FSUN.

Sixth Street Specialty Lending (TSLX)

Market Cap: $1.79 billion

Originally launched as TPG Specialty Lending before rebranding in 2020, Sixth Street Specialty Lending (NYSE:TSLX) is a business development company that provides customized financing solutions to middle-market companies across various industries.

Why Are We Out on TSLX?

1. 1.2% annual revenue growth over the last two years was slower than its financials peers
2. Earnings per share were flat over the last two years and fell short of the peer group average

At $18.93 per share, Sixth Street Specialty Lending trades at 9.7x forward P/E. To fully understand why you should be careful with TSLX, check out our full research report (it’s free).

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.