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.
Kohl's (KSS)
Market Cap: $1.72 billion
Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE: KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.
Why Do We Pass on KSS?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Kohl's is trading at $15.27 per share, or 57.8x forward P/E. Dive into our free research report to see why there are better opportunities than KSS.
Hain Celestial (HAIN)
Market Cap: $146.3 million
Sold in over 75 countries around the world, Hain Celestial (NASDAQ: HAIN) is a natural and organic food company whose products range from snacks to teas to baby food.
Why Do We Avoid HAIN?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Sales were less profitable over the last three years as its earnings per share fell by 55.5% annually, worse than its revenue declines
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Hain Celestial’s stock price of $1.64 implies a valuation ratio of 7.6x forward P/E. Read our free research report to see why you should think twice about including HAIN in your portfolio.
Atkore (ATKR)
Market Cap: $2.04 billion
Protecting the things that power our world, Atkore (NYSE: ATKR) designs and manufactures electrical safety products.
Why Do We Think ATKR Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Free cash flow margin shrank by 5.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $60.50 per share, Atkore trades at 9.9x forward P/E. Check out our free in-depth research report to learn more about why ATKR doesn’t pass our bar.
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