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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
BlackLine (BL)
Market Cap: $3.09 billion
Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ:BL) provides software for organizations to automate accounting and finance tasks.
Why Are We Wary of BL?
- Average billings growth of 6.7% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 6.8% for the next 12 months implies demand will slow from its three-year trend
- Free cash flow margin is expected to remain in place over the coming year, marking a divergence from its peers
BlackLine’s stock price of $46.70 implies a valuation ratio of 5x forward price-to-sales. To fully understand why you should be careful with BL, check out our full research report (it’s free).
Greenbrier (GBX)
Market Cap: $1.33 billion
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE:GBX) supplies the freight rail transportation industry with railcars and related services.
Why Should You Dump GBX?
- Annual sales declines of 1.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 13.3%
- Free cash flow margin shrank by 12 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Greenbrier is trading at $42.01 per share, or 6.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including GBX in your portfolio.
Genpact (G)
Market Cap: $8.44 billion
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE:G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Why Do We Think Twice About G?
- Muted 4.4% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- 2.5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $47.67 per share, Genpact trades at 14.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why G doesn’t pass our bar.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.