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 avoid and some other investments you should consider instead.
Great Lakes Dredge & Dock (GLDD)
Market Cap: $779.9 million
Founded as Lydon & Drews dredging company, Great Lakes Dredge & Dock (NASDAQ: GLDD) provides dredging services, land reclamation, and coastal protection projects in the United States and internationally.
Why Do We Think Twice About GLDD?
- Annual revenue growth of 2.9% over the last five years was below our standards for the industrials sector
- Estimated sales decline of 1.3% for the next 12 months implies a challenging demand environment
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $11.51 per share, Great Lakes Dredge & Dock trades at 14.5x forward P/E. Read our free research report to see why you should think twice about including GLDD in your portfolio.
DaVita (DVA)
Market Cap: $9.23 billion
With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE: DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.
Why Is DVA Not Exciting?
- Annual sales growth of 2.7% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
- Flat treatments over the past two years indicate demand is soft and that the company may need to revise its strategy
- Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its two-year trend
DaVita’s stock price of $129.65 implies a valuation ratio of 11x forward P/E. If you’re considering DVA for your portfolio, see our FREE research report to learn more.
CVB Financial (CVBF)
Market Cap: $2.59 billion
With roots dating back to 1974 and a focus on serving small and medium-sized businesses, CVB Financial (NASDAQ: CVBF) operates Citizens Business Bank, providing banking, lending, and trust services to businesses and individuals across California.
Why Does CVBF Give Us Pause?
- Net interest income trends were unexciting over the last five years as its 1.4% annual growth was below the typical banking firm
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Annual tangible book value per share growth of 2.8% over the last five years was below our standards for the banking sector
CVB Financial is trading at $19.03 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why CVBF doesn’t pass our bar.
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