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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Sprinklr (CXM)
Market Cap: $2.27 billion
Initially focused only on social media management, Sprinklr (NYSE: CXM) is a leading provider of unified customer experience management software.
Why Is CXM Not Exciting?
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Customers had second thoughts about committing to its platform over the last year as its average billings growth of 5.5% underwhelmed
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Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its three-year trend
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Efficiency has decreased over the last year as its operating margin fell by 1.6 percentage points
Sprinklr is trading at $8.66 per share, or 2.9x forward price-to-sales. Check out our free in-depth research report to learn more about why CXM doesn’t pass our bar .
Arhaus (ARHS)
Market Cap: $1.33 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Are We Cautious About ARHS?
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Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
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Revenue base of $1.27 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
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Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5.9 percentage points
Arhaus’s stock price of $9.04 implies a valuation ratio of 18.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ARHS .
FARO (FARO)
Market Cap: $541 million
Launched by two PhD students in a garage, FARO (NASDAQ:FARO) provides 3D measurement and imaging systems for the manufacturing, construction, engineering, and public safety industries.
Why Are We Wary of FARO?
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Sales tumbled by 2.2% annually over the last five years, showing market trends are working against its favor during this cycle
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Suboptimal cost structure is highlighted by its history of operating losses
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Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $28.50 per share, FARO trades at 28.7x forward price-to-earnings. Read our free research report to see why you should think twice about including FARO in your portfolio, it’s free .
Stocks We Like More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free .