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. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Optimum Communications (OPTU)
Market Cap: $595.6 million
Based in Long Island City, Optimum Communications (NYSE: OPTU) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Do We Pass on OPTU?
- Sluggish trends in its broadband subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $1.47 per share, Optimum Communications trades at 8.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than OPTU.
Solaris Energy Infrastructure (SEI)
Market Cap: $4.44 billion
After acquiring Mobile Energy Rentals in 2024 to enter the distributed power market, Solaris Energy Infrastructure (NYSE: SEI) leases mobile power equipment and provides logistics services for oil and gas well completion.
Why Do We Think Twice About SEI?
- Smaller revenue base of $692.1 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 40.6%
- Cash burn makes us question whether it can achieve sustainable long-term growth
Solaris Energy Infrastructure is trading at $81.25 per share, or 69.2x forward P/E. To fully understand why you should be careful with SEI, check out our full research report (it’s free).
United Natural Foods (UNFI)
Market Cap: $3.02 billion
With a vast network of 55 distribution centers spanning approximately 30 million square feet of warehouse space, United Natural Foods (NYSE: UNFI) is North America's premier grocery wholesaler distributing natural, organic, and conventional products to over 30,000 retail locations across the US and Canada.
Why Do We Steer Clear of UNFI?
- Annual sales growth of 1.2% over the last three years lagged behind its consumer staples peers as its large revenue base made it difficult to generate incremental demand
- Gross margin of 13.4% is an output of its commoditized products
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 20.9% annually
United Natural Foods’s stock price of $45.81 implies a valuation ratio of 15x forward P/E. Read our free research report to see why you should think twice about including UNFI in your portfolio.
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