The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two that may struggle to keep up.
Two Stocks to Sell:
AMC Networks (AMCX)
Market Cap: $435.7 million
Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ: AMCX) is a broadcaster producing a diverse range of television shows and movies.
Why Should You Dump AMCX?
- Annual sales declines of 3.9% for the past five years show its products and services struggled to connect with the market
- Free cash flow margin is expected to increase by 1.5 percentage points next year, suggesting the company will have more capital to invest or return to shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
AMC Networks is trading at $10.01 per share, or 7.2x forward P/E. If you’re considering AMCX for your portfolio, see our FREE research report to learn more.
Pitney Bowes (PBI)
Market Cap: $1.65 billion
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE: PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Why Are We Hesitant About PBI?
- Sales tumbled by 10.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Projected sales decline of 3.5% over the next 12 months indicates demand will continue deteriorating
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.7% for the last five years
At $10.16 per share, Pitney Bowes trades at 7.2x forward P/E. Read our free research report to see why you should think twice about including PBI in your portfolio.
One Stock to Watch:
CarGurus (CARG)
Market Cap: $3.67 billion
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Do We Like CARG?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 11.3% annual growth in its average revenue per user
- Healthy EBITDA margin of 29.2% shows it’s a well-run company with efficient processes, and its profitability grew over the last few years thanks to its successful cost optimization efforts
- Free cash flow margin jumped by 20.9 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
CarGurus’s stock price of $38.50 implies a valuation ratio of 11x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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