The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here are two Russell 2000 stocks that could deliver strong gains and one that may struggle to keep up.
One Stock to Sell:
Compass (COMP)
Market Cap: $3.07 billion
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Does COMP Fall Short?
- Performance surrounding its principal agents has lagged its peers
- Poor expense management has led to operating margin losses
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $5.93 per share, Compass trades at 13.5x forward P/E. Dive into our free research report to see why there are better opportunities than COMP.
Two Stocks to Buy:
Vital Farms (VITL)
Market Cap: $1.59 billion
With an emphasis on ethically produced products, Vital Farms (NASDAQ: VITL) specializes in pasture-raised eggs and butter.
Why Is VITL a Good Business?
- Products are flying off the shelves as its unit sales averaged 17.8% growth over the past two years
- Expected revenue growth of 26.6% for the next year suggests its market share will rise
- Earnings per share grew by 161% annually over the last three years and trumped its peers
Vital Farms’s stock price of $36.20 implies a valuation ratio of 26x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
American Superconductor (AMSC)
Market Cap: $1.34 billion
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Should You Buy AMSC?
- Impressive 45% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Free cash flow flipped to positive over the last five years, showing the company is at an important crossroads
- Rising returns on capital show the company is starting to reap the benefits of its past investments
American Superconductor is trading at $30.96 per share, or 58.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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