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

Mohawk Industries (MHK)

Market Cap: $6.51 billion

Established in 1878, Mohawk Industries (NYSE:MHK) is a leading producer of floor-covering products for both residential and commercial applications.

Why Are We Out on MHK?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth

2. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Mohawk Industries’s stock price of $108.45 implies a valuation ratio of 9.9x forward price-to-earnings. Read our free research report to see why you should think twice about including MHK in your portfolio, it’s free.

Funko (FNKO)

Market Cap: $223.1 million

Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ:FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.

Why Do We Pass on FNKO?

1. Sales tumbled by 10.9% annually over the last two years, showing consumer trends are working against its favor

2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 31.3% annually

3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $4.34 per share, Funko trades at 10.2x forward price-to-earnings. If you’re considering FNKO for your portfolio, see our FREE research report to learn more.

Jazz Pharmaceuticals (JAZZ)

Market Cap: $6.28 billion

Originally founded in 2003 and now headquartered in Ireland following a 2012 tax inversion merger, Jazz Pharmaceuticals (NASDAQGS:JAZZ) develops and markets medicines for sleep disorders, epilepsy, and cancer, with a focus on treatments for patients with limited therapeutic options.