Both TTEC Holdings, Inc. TTEC and Red Cat Holdings, Inc. RCAT are small-cap, high-risk stocks undergoing vital business pivots – TTEC in AI-led customer experience outsourcing and RCAT in defense drone manufacturing. These stocks carry structural turnarounds and bullish narratives.
Let us delve deeper to find out which of these two stocks should find a place in your portfolio.
The Case for TTEC
TTEC Holdings ended the fourth quarter of 2025 with its top line at $570 million, outpacing the high end of the company’s previous outlook. Although the figure witnessed marginal growth from the preceding quarter, the TTEC Digital segment showed an impressive 9.2% year-over-year rise. During the reported quarter, the adjusted EBITDA margin widened 190 basis points year over year, highlighting operational prowess and indicating efficiency in its business model.
The company ended 2025 with a solid cash position, vital to its scalability and strategic shift in its operations. TTEC generated $83 million in free cash flow (FCF) in 2025 against a massive $104 million in cash burn in 2024. This healthy recovery was caused by the discontinuation of the factoring facility, leading to an $86-million year-over-year improvement.
The impact of this enhancement was felt in its balance sheet, clearly visible in its liquidity and debt position. As of the end of December 2025, TTEC’s net debt position declined to $825.1 million from $893 million at the end of the preceding year. It was caused by a cash flow of $83 million that lowered facility borrowings by $70 million.
On the liquidity front, the company ended 2025 with a current ratio of 1.89, up from the preceding year’s 1.84. It is a clear indication of efficient short-term debt coverage ability, which, when combined with an optimized capital structure and better cash management skills, uplifts TTEC’s financial flexibility.
The company also has a solid hold in AI, as evidenced by the CEO, Ken Tuchman’s, statements made during the fourth-quarter 2025 earnings call. TTEC’s deep expertise in the full CX tech stack and complex workflows is allowing it to “bridge the gap.” Management expressed its commitment to the top and bottom-line financial disciplines while investing in CX innovation and customer relationships.
The Case for RCAT
Red Cat ended the fourth quarter of 2025, with its top line skyrocketing 172% year over year. While this explosive growth is a culmination of a surge in Black Widow drone orders, BlueOps expansion and a solid ecosystem of defense partners, it did not fully translate into being profitable. During the aforementioned quarter, Red Cat reported a net loss of $19.7 million, which added to the annual loss of $72.1 million.
This decline in profitability resulted from an operating loss of $66.6 million in 2025, led by a sudden spike in research and development, and general and administrative expenses. That said, a loss of 73 cents per share in 2025 highlights the company’s inability to translate revenues into profitability efficiently.
Red Cat ended 2025 with a massive operating cash outflow of $89.1 million compared with $25.1 million in 2024. Although cash balance surged to $167.9 million, it was mainly due to the issuance of common stock, which provided $234.3 million in proceeds. There was a significant rise in weighted average shares outstanding to 98.9 million from the preceding year’s 75.9 million, which diluted existing shareholders.
While rising inventory is a signal of solid future sales, it ties up capital and carries the risk of obsolescence in the swift-paced drone market. Accounts receivable inflated to $26.2 million, from the preceding year’s nearly half a million, demonstrating RCAT's inefficiency in collecting cash from the booked sales.
It is vital to acknowledge that RCAT’s growth is tied to government contracts and “customary closing conditions” that are not guaranteed. It raises revenue concentration risks since a failure to secure contracts would leave the company with large overhead and inventory.
How Do Estimates Compare for TTEC & RCAT
The Zacks Consensus Estimate for TTEC Holdings’ 2026 sales is $2 billion, a 5% year-over-year decline. The consensus estimate for earnings is held at $1.2, implying a 9.1% increase over the preceding year’s actual. One earnings estimate for 2026 has moved north in the past 60 days, with no downward revisions.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Red Cat’s 2026 sales is pegged at $170.3 million, indicating staggering 318.1% year-over-year growth. The consensus estimate for loss is pegged at 34 cents per share, whereas it incurred a loss of 73 cents in the preceding year. One earnings estimate for 2026 has moved south in the past 60 days versus no northbound revision.
Image Source: Zacks Investment Research
TTEC Trades Cheaper Than RCAT
Red Cat is currently trading at a forward 12-month price/sales (P/S) ratio of 7.18X, which is slightly below the 12-month median of 7.69X. TTEC is trading at 0.07X, marginally lower than the 12-month median of 0.08X. Although both stocks are trading at a discount compared with their historical valuations, TTEC Holdings is way cheaper than Red Cat.
Price/Sales F12M
Image Source: Zacks Investment Research
Buy TTEC, Cut Ties With RCAT for Now
We recommend that investors buy TTEC Holdings’s stock due to its successful pivot toward high-margin, AI-backed customer experience solutions. It delivered $83 million in FCF and lowered debt significantly in 2025. The stock trades at a P/S ratio of 0.07X, securing a resilient and profitable core that improves operational prowess.
Conversely, RCAT remains a Sell for now despite staggering top-line growth during the fourth quarter of 2025. It is due to the losses suffered in 2025 and shareholder dilution due to the rise in weighted average shares outstanding. The company’s capital is caught up with slow-moving receivables and government contracts, carrying a hint of uncertainty. RCAT’s high valuation and cash burn compel us to suggest investors square off their positions and potential buyers are asked to avoid this stock for now.
TTEC Holdings has a Zacks Rank #2 (Buy), while Red Cat carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
