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.
Krispy Kreme (DNUT)
Market Cap: $657.8 million
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Are We Out on DNUT?
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- Cash-burning history makes us doubt the long-term viability of its business model
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Krispy Kreme is trading at $3.85 per share, or 16.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including DNUT in your portfolio.
Myriad Genetics (MYGN)
Market Cap: $452.4 million
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Should You Sell MYGN?
- 4.6% annual revenue growth over the last two years was slower than its healthcare peers
- Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $4.79 per share, Myriad Genetics trades at 120.3x forward P/E. To fully understand why you should be careful with MYGN, check out our full research report (it’s free).
Hamilton Insurance Group (HG)
Market Cap: $3.25 billion
Founded in 2013 and operating through three distinct underwriting platforms across four countries, Hamilton Insurance Group (NYSE: HG) operates global specialty insurance and reinsurance platforms across Lloyd's, Ireland, Bermuda, and the United States.
Why Do We Think Twice About HG?
- Sales are projected to tank by 4% over the next 12 months as demand evaporates
- Falling earnings per share over the last one years has some investors worried as stock prices ultimately follow EPS over the long term
Hamilton Insurance Group’s stock price of $32.69 implies a valuation ratio of 1.1x forward P/B. If you’re considering HG for your portfolio, see our FREE research report to learn more.
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