Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.
Two stocks to sell:
Amtech (ASYS)
Market cap: $194.1 million
Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ: ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.
Why Are We Bearish on ASYS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.7% annually over the last two years
- Subpar operating margin of 0.2% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
Amtech’s stock price of $11.09 implies a valuation ratio of 11x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why ASYS doesn’t pass our bar.
Insteel (IIIN)
Market cap: $521.4 million
Growing from a small wire manufacturer to one of the largest in the U.S., Insteel (NYSE: IIIN) provides steel wire reinforcing products for concrete.
Why Are We Cautious About IIIN?
- Muted 4.6% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $26.97 per share, Insteel trades at 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than IIIN.
One stock to buy:
StepStone Group (STEP)
Market cap: $3.52 billion
Operating as both an advisor and asset manager with over $100 billion in assets under management, StepStone Group (NASDAQ: STEP) is an investment firm that provides clients with access to private market investments across private equity, real estate, private debt, and infrastructure.
Why Should You Buy STEP?
- Annual revenue growth of 35.9% over the last two years was superb and indicates its market share increased during this cycle
- Earnings growth has easily exceeded the peer group average over the last two years as its EPS has compounded at 20.3% annually
StepStone Group is trading at $42.69 per share, or 16.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks we like even more
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
