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 are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Fiverr (FVRR)
Market Cap: $814 million
Based in Tel Aviv, Fiverr (NYSE: FVRR) operates a fixed price global freelance marketplace for digital services.
Why Are We Cautious About FVRR?
- Value proposition isn’t resonating strongly as its active buyers averaged 8.1% drops over the last two years
- Estimated sales growth of 7% for the next 12 months implies demand will slow from its three-year trend
- Excessive marketing spend signals little organic demand and traction for its platform
At $22 per share, Fiverr trades at 9x forward EV/EBITDA. Read our free research report to see why you should think twice about including FVRR in your portfolio.
The RealReal (REAL)
Market Cap: $594.9 million
Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.
Why Does REAL Worry Us?
- Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 5.5% annually
- Cash-burning history makes us doubt the long-term viability of its business model
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
The RealReal’s stock price of $5.20 implies a valuation ratio of 21.1x forward EV/EBITDA. To fully understand why you should be careful with REAL, check out our full research report (it’s free).
WideOpenWest (WOW)
Market Cap: $278.1 million
Initially started in Denver as a cable television provider, WideOpenWest (NYSE: WOW) provides high-speed internet, cable, and telephone services to the Midwest and Southeast regions of the U.S.
Why Should You Sell WOW?
- Performance surrounding its subscribers has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
WideOpenWest is trading at $3.44 per share, or 1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why WOW doesn’t pass our bar.
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