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.
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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Privia Health (PRVA)
Market Cap: $3.53 billion
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Are We Wary of PRVA?
- Revenue base of $2.25 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- ROIC of 0% reflects management’s challenges in identifying attractive investment opportunities
Privia Health’s stock price of $28.15 implies a valuation ratio of 26.1x forward P/E. Read our free research report to see why you should think twice about including PRVA in your portfolio.
Employers Holdings (EIG)
Market Cap: $914.5 million
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE:EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Why Is EIG Risky?
- Growth in insurance policies was lackluster over the last two years as its 1.7% annual growth underperformed the typical financial institution
- Day-to-day expenses have swelled relative to revenue over the last five years as its pre-tax profit margin fell by 28.5 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 29.6% annually while its revenue grew
Employers Holdings is trading at $50.15 per share, or 1x forward P/B. If you’re considering EIG for your portfolio, see our FREE research report to learn more.
First Bancorp (FBNC)
Market Cap: $2.65 billion
Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ:FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.
Why Do We Think Twice About FBNC?
- Muted 2% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Estimated net interest income growth of 4.3% for the next 12 months implies demand will slow from its five-year trend
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
At $64.01 per share, First Bancorp trades at 1.6x forward P/B. Check out our free in-depth research report to learn more about why FBNC doesn’t pass our bar.
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