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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Children's Place (PLCE)
Market Cap: $91.41 million
Offering sizes up to young teens, The Children’s Place (NASDAQ: PLCE) is a specialty retailer that sells its own brands of kid’s apparel and accessories.
Why Is PLCE Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Sales were less profitable over the last four years as its earnings per share fell by 37% annually, worse than its revenue declines
- High net-debt-to-EBITDA ratio of 78× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Children's Place’s stock price of $7.10 implies a valuation ratio of 6.9x forward price-to-earnings. If you’re considering PLCE for your portfolio, see our FREE research report to learn more.
Newmark (NMRK)
Market Cap: $2.29 billion
Founded in 1929, Newmark (NASDAQ: NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Why Do We Pass on NMRK?
- Sales were flat over the last two years, indicating it's failed to expand its business
- Earnings per share fell by 5.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $12.68 per share, Newmark trades at 9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than NMRK.
Masimo (MASI)
Market Cap: $9.05 billion
Founded in 1989, Masimo Corporation (NASDAQ: MASI) develops and manufactures medical devices, with a focus on noninvasive monitoring technologies.
Why Are We Cautious About MASI?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Estimated sales decline of 27.6% for the next 12 months implies a challenging demand environment
- Eroding returns on capital suggest its historical profit centers are aging
Masimo is trading at $167.11 per share, or 36.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why MASI doesn’t pass our bar.
Stocks We Like More
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Take advantage of the rebound by checking out 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
