There are some small-cap stocks to sell this month. These companies offer too much risk for too little upside, meaning that they do not fill worthy positions in investors’ portfolios. These small-cap stocks to sell in this article were selected due to their declining fundamentals and bleak outlooks, both for the short term and beyond.

Therefore, to safeguard your investment portfolio against potential losses, it is advisable to take action today by removing these high-risk small-cap stocks. Doing so can help investors maintain a balanced and healthy portfolio, one that is better suited to withstand market volatility and deliver consistent returns over time.

So, here are three small-cap stocks to consider dropping from your portfolio.

Lakeland Industries (LAKE)

Lakeland Industries (NASDAQ:LAKE) is a manufacturer and seller of industrial protective clothing and accessories. 

Despite posting a strong previous quarter, I feel that the headwinds facing LAKE are too strong, and thus, it’s one of those small-cap stocks to sell.

Problems facing the company include currency fluctuations negatively impacting operating profit and ongoing economic headwinds in key markets like China. Furthermore, the company’s reliance on strategic acquisitions for growth, as indicated by its plans to expand through mergers and acquisitions until 2027, gives it substantial financial and execution risks.

I also feel that LAKE stock’s valuation has stretched too far for its fundamentals to handle. Its stock price has surged 11.79% over the past year, and it trades at 20 times earnings for just $122.45 million in revenue over the past 12 months.

LAKE, therefore, seems poised for a correction, and it might be wise for current investors to sell a portion of their position to take a profit or exit entirely.

TransMedics (TMDX)

TransMedics (NASDAQ:TMDX) claims to be on the brink of profitability, with projections of triple-digit EPS growth over the next few years. The company’s net income margins are expected to improve from negative 5% in 2023 to positive 8% in 2026, reaching potentially 20% by the end of the decade. 

However, Wall Street is less optimistic, as it expects the company’s EPS to remain negative beyond FY2026, according to projections.

Holding a stock for this long is risky, and there are also fears that it will need to take on additional debt or make an equity raise that could further burden investors. The company has $427.61 million in cash and $515.65 million in debt. It also had around $112 million in capital expenditures over the past 12 months.

If TMDX continues with its rate of cash burn, it will need to weaken its balance sheet or issue shares further, diluting current investors.

I think it might be a wise move for investors to consider selling their holdings in this company and buy back once there’s more certainty that it’s able to generate a single dollar of profit without diluting shareholders.

Academy Sports and Outdoors (ASO)

Academy Sports and Outdoors (NASDAQ:ASO) has been a topic of discussion among investors and analysts, especially with its performance in 2023 and outlook for 2024.

In 2023, ASO reported a quarterly earnings miss with an EPS of $1.38 against a consensus estimate of $1.58. The revenue for the same quarter was $1.40 billion, down from the expected $1.44 billion, indicating a year-over-year revenue decline of 6.4%​

Another problem for ASO is that it the company has $274.83 million in cash and $1.80 billion in debt. This gives a negative cash position of -$20.56 per share, which I think underscores its financial risk.

Furthermore, its quick ratio of 0.25 means that for every dollar of current liabilities, the company only has 25 cents in liquid assets available to pay them.

ASO’s declining free cash flow year-over-year is also particularly concerning, dropping from 970 million in 2020 to 443 million in 2022. 

These factors and more make me believe that ASO is one of those small-cap stocks to sell.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.