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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
nCino (NCNO)
Market Cap: $1.81 billion
Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ: NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.
Why Should You Dump NCNO?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 14.6% underwhelmed
- Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 60.3% reflects its relatively high servicing costs
At $15.26 per share, nCino trades at 3x forward price-to-sales. Read our free research report to see why you should think twice about including NCNO in your portfolio.
Callaway Golf Company (CALY)
Market Cap: $2.56 billion
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE: CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Do We Avoid CALY?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3.2 percentage points over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Callaway Golf Company’s stock price of $13.87 implies a valuation ratio of 28.9x forward P/E. If you’re considering CALY for your portfolio, see our FREE research report to learn more.
Surgery Partners (SGRY)
Market Cap: $1.73 billion
With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.
Why Does SGRY Fall Short?
- Underwhelming unit sales over the past two years imply it may need to invest in improvements to get back on track
- Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Surgery Partners is trading at $13.56 per share, or 52.4x forward P/E. Dive into our free research report to see why there are better opportunities than SGRY.
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