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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
ESAB (ESAB)
Market Cap: $7.41 billion
Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE: ESAB) manufactures and sells welding and cutting equipment for numerous industries.
Why Does ESAB Worry Us?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Earnings per share lagged its peers over the last three years as they only grew by 4.6% annually
At $121.75 per share, ESAB trades at 22.6x forward price-to-earnings. Read our free research report to see why you should think twice about including ESAB in your portfolio.
Myriad Genetics (MYGN)
Market Cap: $906.7 million
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Do We Steer Clear of MYGN?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Issuance of new shares over the last five years caused its earnings per share to fall by 35.3% annually
- Negative returns on capital show that some of its growth strategies have backfired
Myriad Genetics is trading at $10.04 per share, or 190x forward price-to-earnings. To fully understand why you should be careful with MYGN, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
The Ensign Group (ENSG)
Market Cap: $7.46 billion
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Are We Fans of ENSG?
- Unit sales averaged 14.3% growth over the past two years and imply healthy demand for its products
- Estimated revenue growth of 14.3% for the next 12 months implies its momentum over the last two years will continue
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 19.7% annually
The Ensign Group’s stock price of $130.79 implies a valuation ratio of 21.3x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
