Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
America's Car-Mart (CRMT)
Market Cap: $54.05 million
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ: CRMT) sells used cars to budget-conscious consumers.
Why Are We Out on CRMT?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Performance over the past three years was negatively impacted by new share issuances as its earnings per share fell by 31.2% annually while its revenue was flat
America's Car-Mart’s stock price of $6.51 implies a valuation ratio of 20.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CRMT in your portfolio.
Inter Parfums (IPAR)
Market Cap: $2.96 billion
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ: IPAR) manufactures and distributes fragrances worldwide.
Why Do We Think Twice About IPAR?
- Subscale operations are evident in its revenue base of $1.49 billion, meaning it has fewer distribution channels than its larger rivals
- Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
- Free cash flow margin dropped by 2.2 percentage points over the last year, implying the company became more capital intensive as competition picked up
Inter Parfums is trading at $92.39 per share, or 17.7x forward P/E. If you’re considering IPAR for your portfolio, see our FREE research report to learn more.
Laureate Education (LAUR)
Market Cap: $4.78 billion
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ: LAUR) is a global network of higher education institutions.
Why Should You Sell LAUR?
- Sluggish trends in its enrolled students suggest customers aren’t adopting its solutions as quickly as the company hoped
- Incremental sales over the last five years were less profitable as its 4.2% annual earnings per share growth lagged its revenue gains
- Low free cash flow margin of 14.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $34.15 per share, Laureate Education trades at 16.6x forward P/E. Dive into our free research report to see why there are better opportunities than LAUR.
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