1 Small-Cap Stock to Research Further and 2 We Question

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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two best left ignored.

Two Small-Cap Stocks to Sell:

Array (ARRY)

Market Cap: $1.22 billion

Going public in October 2020, Array (NASDAQ:ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.

Why Do We Pass on ARRY?

1. Disappointing unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Array is trading at $7.99 per share, or 11.5x forward P/E. If you’re considering ARRY for your portfolio, see our FREE research report to learn more.

UniFirst (UNF)

Market Cap: $3.09 billion

With a fleet of trucks making weekly deliveries to over 300,000 customer locations, UniFirst (NYSE:UNF) provides, rents, cleans, and maintains workplace uniforms and protective clothing for businesses across various industries.

Why Does UNF Fall Short?

1. Estimated sales growth of 1% for the next 12 months implies demand will slow from its two-year trend
2. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $166.80 per share, UniFirst trades at 19.7x forward P/E. Dive into our free research report to see why there are better opportunities than UNF.

One Small-Cap Stock to Watch:

Brinker International (EAT)

Market Cap: $6.09 billion

Founded by Norman Brinker in Dallas, Brinker International (NYSE:EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.

Why Does EAT Stand Out?

1. Average same-store sales growth of 13.3% over the past two years indicates its restaurants are resonating with diners
2. Operating margin expanded by 4.3 percentage points over the last year as it scaled and became more efficient
3. Free cash flow margin increased by 2.6 percentage points over the last year, giving the company more capital to invest or return to shareholders

Brinker International’s stock price of $137.08 implies a valuation ratio of 13.8x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

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