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.
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 are three Russell 2000 stocks to avoid and better alternatives to consider.
Laureate Education (LAUR)
Market Cap: $4.77 billion
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ: LAUR) is a global network of higher education institutions.
Why Should You Sell LAUR?
- Annual revenue growth of 10.7% over the last five years was below our standards for the consumer discretionary sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 14% annually while its revenue grew
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
At $33.68 per share, Laureate Education trades at 16.7x forward P/E. Read our free research report to see why you should think twice about including LAUR in your portfolio.
Malibu Boats (MBUU)
Market Cap: $510.2 million
Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Do We Think MBUU Will Underperform?
- Muted 3.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Malibu Boats is trading at $25.35 per share, or 14.7x forward P/E. If you’re considering MBUU for your portfolio, see our FREE research report to learn more.
TriCo Bancshares (TCBK)
Market Cap: $1.64 billion
Founded in 1975 and headquartered in Chico, California, TriCo Bancshares (NASDAQ: TCBK) operates Tri Counties Bank, providing personal, small business, and commercial banking services through branches across California.
Why Does TCBK Fall Short?
- Muted 6.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.4% annually
- Estimated tangible book value per share growth of 7.8% for the next 12 months implies profitability will slow from its two-year trend
TriCo Bancshares’s stock price of $50.97 implies a valuation ratio of 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than TCBK.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
