3 Small-Cap Stocks Skating on Thin Ice

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. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Supernus Pharmaceuticals (SUPN)

Market Cap: $1.75 billion

Founded in 2005, Supernus Pharmaceuticals (NASDAQ:SUPN) develops and commercializes treatments for central nervous system (CNS) disorders, focusing on epilepsy, ADHD, and Parkinson’s disease.

Why Should You Dump SUPN?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Revenue base of $661.8 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Estimated sales decline of 5.6% for the next 12 months implies an even more challenging demand environment

Supernus Pharmaceuticals’s stock price of $30.40 implies a valuation ratio of 16.3x forward price-to-earnings. Read our free research report to see why you should think twice about including SUPN in your portfolio.

Ingram Micro (INGM)

Market Cap: $4.45 billion

Operating as a critical link in the global technology supply chain with a presence in 57 countries, Ingram Micro (NYSE:INGM) is a global technology distributor that connects manufacturers with resellers, providing hardware, software, cloud services, and logistics solutions.

Why Should You Sell INGM?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.5% annually over the last two years
2. Earnings per share have dipped by 7.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

At $18.40 per share, Ingram Micro trades at 6.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than INGM.

Insperity (NSP)

Market Cap: $3.26 billion

Pioneering the professional employer organization (PEO) industry it helped create, Insperity (NYSE:NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.

Why Are We Wary of NSP?

1. Estimated sales growth of 4.9% for the next 12 months is soft and implies weaker demand
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 3.2 percentage points
3. Issuance of new shares over the last five years caused its earnings per share to fall by 2.9% annually while its revenue grew

Insperity is trading at $86.56 per share, or 24.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why NSP doesn’t pass our bar.

Stocks We Like More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.