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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Kulicke and Soffa (KLIC)
Market Cap: $5.68 billion
Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices
Why Is KLIC Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.9% annually over the last five years
- Inability to adjust its cost structure while its revenue declined over the last five years led to a 25 percentage point drop in the company’s operating margin
- Free cash flow margin dropped by 20.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Kulicke and Soffa is trading at $109.71 per share, or 25.6x forward P/E. If you’re considering KLIC for your portfolio, see our FREE research report to learn more.
OneMain (OMF)
Market Cap: $6.21 billion
Dating back to 1912 and formerly known as Springleaf, OneMain Holdings (NYSE: OMF) provides personal loans, auto financing, and credit cards to nonprime consumers who have limited access to traditional banking services.
Why Do We Think Twice About OMF?
- Annual revenue growth of 5.3% over the last five years was below our standards for the financials sector
- Earnings per share fell by 5.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
At $53.85 per share, OneMain trades at 7x forward P/E. Read our free research report to see why you should think twice about including OMF in your portfolio.
Live Oak Bancshares (LOB)
Market Cap: $1.75 billion
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE: LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
Why Does LOB Worry Us?
- Net interest margin of 3.3% is well below other banks, signaling its loans aren’t very profitable
- Earnings per share fell by 2.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Live Oak Bancshares’s stock price of $37.86 implies a valuation ratio of 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than LOB.
High-Quality Stocks for All Market Conditions
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