Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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 is one small-cap stock that could be the next 100 bagger and two that could be down big.
Market Cap: $663.8 million
Acquiring Goodyear’s farm tire business in 2005, Titan (NSYE:TWI) is a manufacturer and supplier of wheels, tires, and undercarriages used in off-highway vehicles such as construction vehicles.
Why Is TWI Risky?
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Customers postponed purchases of its products and services this cycle as its revenue declined by 7.4% annually over the last two years
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Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 14%
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Sales were less profitable over the last two years as its earnings per share fell by 93.4% annually, worse than its revenue declines
Titan International’s stock price of $11.12 implies a valuation ratio of 28.8x forward P/E. Check out our free in-depth research report to learn more about why TWI doesn’t pass our bar.
Market Cap: $2.60 billion
With access to millions of trucks, RXO (NYSE:RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.
Why Are We Out on RXO?
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Muted 6.2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
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Performance over the past four years shows its incremental sales were much less profitable, as its earnings per share fell by 38.8% annually
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Short cash runway increases the probability of a capital raise that dilutes existing shareholders
RXO is trading at $15.87 per share, or 56.2x forward P/E. If you’re considering RXO for your portfolio, see our FREE research report to learn more.
Market Cap: $961.6 million
Tracing its roots back to 1892 when it first opened its doors in Kansas, FirstSun Capital Bancorp (NASDAQ:FSUN) operates Sunflower Bank, providing commercial and consumer banking services to businesses and individuals across the Southwest region.
Why Are We Bullish on FSUN?
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Annual net interest income growth of 20.5% over the past four years was outstanding, reflecting market share gains this cycle
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Differentiated product suite results in a Strong performance of its loan book leads to a High-yielding loan book and low cost of funds lead to a premier net interest margin of 4.2%
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Annual tangible book value per share growth of 12.1% over the past five years was outstanding, reflecting strong capital accumulation this cycle