Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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. That said, here is one small-cap stock that could be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
United Bankshares (UBSI)
Market Cap: $5.68 billion
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Is UBSI Risky?
- Sales trends were unexciting over the last five years as its 3.4% annual growth was below the typical banking company
- Muted 4.8% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 4.6% annually
United Bankshares is trading at $40.84 per share, or 1x forward P/B. Read our free research report to see why you should think twice about including UBSI in your portfolio.
Atlantic Union Bankshares (AUB)
Market Cap: $5.04 billion
Tracing its roots back to 1902 when it first opened its doors in Virginia, Atlantic Union Bankshares (NYSE: AUB) is a full-service regional bank providing commercial and retail banking, wealth management, and insurance services throughout Virginia and parts of Maryland and North Carolina.
Why Are We Cautious About AUB?
- Annual earnings per share growth of 6.2% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Products and services are facing profitability challenges during this cycle, as seen in its flat tangible book value per share over the last five years
- Tier one capital ratio of 9.9% raises concerns about the firm’s ability to maintain adequate liquidity
At $35.34 per share, Atlantic Union Bankshares trades at 1x forward P/B. To fully understand why you should be careful with AUB, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Enova (ENVA)
Market Cap: $3.42 billion
Pioneering online lending since 2004 with a massive database of over 65 terabytes of customer behavior data, Enova International (NYSE: ENVA) provides online financial services including installment loans and lines of credit to non-prime consumers and small businesses in the United States and Brazil.
Why Should You Buy ENVA?
- Market share has increased this cycle as its 23.8% annual revenue growth over the last five years was exceptional
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Impressive 16.1% annual book value per share growth over the last five years indicates it’s building equity value this cycle
Enova’s stock price of $136.75 implies a valuation ratio of 8.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
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