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.
Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. Still, investors are uneasy as firms face challenges from AI-driven disruptors and tightening corporate budgets.
These doubts have certainly contributed to services stocks’ recent underperformance - over the past six months, the industry’s 1.8% gain has fallen behind the S&P 500’s 6.9% rise.
Wrapping up Q1 earnings, we look at the numbers and key takeaways for the it distribution & solutions stocks, including ScanSource (NASDAQ:SCSC) and its peers.
Great things are happening to the stocks in this article.
They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
Technology distribution company ScanSource (NASDAQ:SCSC) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 6.3% year on year to $704.8 million. The company’s full-year revenue guidance of $3 billion at the midpoint came in 3.5% below analysts’ estimates. Its non-GAAP profit of $0.86 per share was 11% above analysts’ consensus estimates.
While profitability is essential, it doesn’t guarantee long-term success.
Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
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.
Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions.
While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
Generating cash is essential for any business, but not all cash-rich companies are great investments.
Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how ePlus (NASDAQ:PLUS) and the rest of the it distribution & solutions stocks fared in Q4.
The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer.
However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.
As the Q4 earnings season wraps, let’s dig into this quarter’s best and worst performers in the it distribution & solutions industry, including ScanSource (NASDAQ:SCSC) and its peers.
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.
