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.
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 is one small-cap stock that could be the next 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
Monro (MNRO)
Market Cap: $458.7 million
Started as a single location in Rochester, New York, Monro (NASDAQ: MNRO) provides common auto services such as brake repairs, tire replacements, and oil changes.
Why Should You Sell MNRO?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Sales were less profitable over the last three years as its earnings per share fell by 30.4% annually, worse than its revenue declines
Monro is trading at $15.74 per share, or 26x forward P/E. Dive into our free research report to see why there are better opportunities than MNRO.
TowneBank (TOWN)
Market Cap: $3.11 billion
Founded in 1998 with a commitment to community-centered banking in the Hampton Roads region, TowneBank (NASDAQ: TOWN) is a community-focused financial institution providing banking, lending, and wealth management services to individuals and businesses in Virginia and North Carolina.
Why Is TOWN Not Exciting?
- 5.2% annual revenue growth over the last five years was slower than its banking peers
- Day-to-day expenses have swelled relative to revenue over the last five years as its efficiency ratio increased by 8.5 percentage points
- Muted 4% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its banking peers
At $34.08 per share, TowneBank trades at 1x forward P/B. Read our free research report to see why you should think twice about including TOWN in your portfolio.
One Small-Cap Stock to Watch:
Popular (BPOP)
Market Cap: $9.42 billion
Founded in 1893 as the first bank in Puerto Rico to serve the working class, Popular (NASDAQ: BPOP) is a financial holding company that provides retail, mortgage, and commercial banking services primarily in Puerto Rico and the mainland United States.
Why Are We Fans of BPOP?
- Net interest margin expanded by 57.2 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Annual tangible book value per share growth of 18.2% over the past two years was outstanding, reflecting strong capital accumulation this cycle
Popular’s stock price of $145.93 implies a valuation ratio of 1.4x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
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