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.
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.
RLI (RLI)
Market Cap: $4.87 billion
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE: RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
Why Are We Cautious About RLI?
- Expenses have increased as a percentage of revenue over the last five years as its pre-tax profit margin fell by 10.4 percentage points
- Earnings per share lagged its peers over the last two years as they only grew by 15% annually
- Capital trends were unexciting over the last two years as its 8.4% annual book value per share growth was below the typical insurance firm
RLI’s stock price of $53.05 implies a valuation ratio of 2.7x forward P/B. Dive into our free research report to see why there are better opportunities than RLI.
Zions Bancorporation (ZION)
Market Cap: $9.09 billion
Founded in 1873 during Utah's pioneer era and named after Mount Zion in the Bible, Zions Bancorporation (NASDAQ: ZION) operates seven regional banks across the Western United States, providing commercial, retail, and wealth management services to over a million customers.
Why Are We Hesitant About ZION?
- Net interest income trends were unexciting over the last five years as its 3.8% annual growth was below the typical banking firm
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.3% annually
- Capital trends were unexciting over the last five years as its 1.5% annual tangible book value per share growth was below the typical banking firm
Zions Bancorporation is trading at $62.07 per share, or 1.2x forward P/B. Check out our free in-depth research report to learn more about why ZION doesn’t pass our bar.
Trustmark (TRMK)
Market Cap: $2.61 billion
Tracing its roots back to 1889 in Mississippi, Trustmark (NASDAQ: TRMK) is a financial services organization providing banking, wealth management, insurance, and mortgage services across five southeastern states.
Why Does TRMK Worry Us?
- 9.1% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 4.3% for the next 12 months implies demand will slow from its five-year trend
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 4.7% annually
At $44.46 per share, Trustmark trades at 1.2x forward P/B. Read our free research report to see why you should think twice about including TRMK in your portfolio.
Stocks We Like More
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