Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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.
Douglas Dynamics (PLOW)
Market Cap: $762.9 million
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Do We Pass on PLOW?
- Annual sales declines of 2.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 3.8 percentage points
- Free cash flow margin dropped by 4.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Douglas Dynamics is trading at $33.11 per share, or 15.2x forward P/E. Dive into our free research report to see why there are better opportunities than PLOW.
OneMain (OMF)
Market Cap: $7.32 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 Steer Clear of OMF?
- Muted 3.8% annual revenue growth over the last five years shows its demand lagged behind its financials peers
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
- Debt-to-equity ratio of 6.6× is concerningly high, indicating excessive leverage that could limit financial flexibility
OneMain’s stock price of $62.19 implies a valuation ratio of 8.8x forward P/E. To fully understand why you should be careful with OMF, check out our full research report (it’s free).
Synovus Financial (SNV)
Market Cap: $7.23 billion
Tracing its roots back to 1888 when a worker accidentally dropped a textile mill payroll into the dust, prompting the need for better banking, Synovus Financial (NYSE: SNV) is a regional financial services company that provides commercial and consumer banking, wealth management, and specialized lending services across five southeastern states.
Why Are We Hesitant About SNV?
- Annual net interest income growth of 4% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 5.6% for the next 12 months is soft and implies weaker demand
- Net interest margin of 3.2% reflects its high servicing and capital costs
At $52.11 per share, Synovus Financial trades at 1.4x forward P/B. Check out our free in-depth research report to learn more about why SNV doesn’t pass our bar.
Stocks We Like More
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