3 Small-Cap Stocks We Approach with Caution

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 swipe left on and some alternatives you should look into instead.

QuidelOrtho (QDEL)

Market Cap: $1.64 billion

Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ:QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.

Why Should You Sell QDEL?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Free cash flow margin shrank by 21.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Waning returns on capital imply its previous profit engines are losing steam

QuidelOrtho’s stock price of $24.17 implies a valuation ratio of 10.7x forward P/E. Read our free research report to see why you should think twice about including QDEL in your portfolio.

United Community Banks (UCB)

Market Cap: $4.13 billion

Starting as a small community bank in 1950 and expanding through strategic acquisitions across the Southeast, United Community Banks (NYSE:UCB) is a regional bank holding company that provides financial services including loans, deposits, wealth management, and merchant services across the southeastern United States.

Why Are We Cautious About UCB?

1. 6% annual revenue growth over the last two years was slower than its banking peers
2. Incremental sales over the last five years were less profitable as its 6.7% annual earnings per share growth lagged its revenue gains
3. Estimated tangible book value per share growth of 9.3% for the next 12 months is soft and implies weaker profitability

United Community Banks is trading at $34.56 per share, or 1.1x forward P/B. To fully understand why you should be careful with UCB, check out our full research report (it’s free).

Butterfield Bank (NTB)

Market Cap: $2.14 billion

Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE:NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.

Why Does NTB Worry Us?

1. Net interest income trends were unexciting over the last five years as its 2.8% annual growth was below the typical banking firm
2. Projected net interest income is flat for the next 12 months, implying demand will slow from its five-year trend
3. Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable

At $52.73 per share, Butterfield Bank trades at 1.7x forward P/B. If you’re considering NTB for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.