Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Lindblad Expeditions (LIND)
Market Cap: $1.18 billion
Founded by explorer Sven-Olof Lindblad in 1979, Lindblad Expeditions (NASDAQ: LIND) offers cruising experiences to remote destinations in partnership with National Geographic.
Why Should You Dump LIND?
- Lackluster 16.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Operating margin of 5.5% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
Lindblad Expeditions is trading at $18.15 per share, or 132.7x forward P/E. Read our free research report to see why you should think twice about including LIND in your portfolio.
L.B. Foster (FSTR)
Market Cap: $288.8 million
Founded with a $2,500 loan, L.B. Foster (NASDAQ: FSTR) is a provider of products and services for the transportation and energy infrastructure sectors, including rail products, construction materials, and coating solutions.
Why Are We Hesitant About FSTR?
- Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 4.4% for the past two years was weak
- Earnings per share were flat over the last five years and fell short of the peer group average
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $28 per share, L.B. Foster trades at 18.7x forward P/E. If you’re considering FSTR for your portfolio, see our FREE research report to learn more.
Republic Bancorp (RBCAA)
Market Cap: $1.37 billion
With roots dating back to 1974 and operating across multiple states including Kentucky, Indiana, Florida, Ohio, and Tennessee, Republic Bancorp (NASDAQGS:RBCA.A) is a Kentucky-based financial holding company that operates a bank offering traditional banking, mortgage services, and specialized financial products.
Why Does RBCAA Worry Us?
- Sales trends were unexciting over the last five years as its 6% annual growth was below the typical banking company
- Net interest income stagnated over the last five years and signal the need for new growth strategies
- Estimated tangible book value per share growth of 7.4% for the next 12 months implies profitability will slow from its two-year trend
Republic Bancorp’s stock price of $69.45 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why RBCAA doesn’t pass our bar.
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