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.
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 are two Russell 2000 stocks that could deliver strong gains and one that may struggle to keep up.
One Stock to Sell:
Figs (FIGS)
Market Cap: $2.50 billion
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE: FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Why Do We Avoid FIGS?
- Muted 19.1% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- Free cash flow margin is projected to show no improvement next year
Figs’s stock price of $14.93 implies a valuation ratio of 59.4x forward P/E. Read our free research report to see why you should think twice about including FIGS in your portfolio.
Two Stocks to Buy:
Powell (POWL)
Market Cap: $10.09 billion
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Will POWL Beat the Market?
- Impressive 20.6% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 58.2% outpaced its revenue gains
- Free cash flow margin grew by 22 percentage points over the last five years, giving the company more chips to play with
Powell is trading at $277.48 per share, or 44.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Huron (HURN)
Market Cap: $2.03 billion
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
Why Do We Love HURN?
- Impressive 14.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 26.1% to outpace its revenue gains
- Free cash flow margin jumped by 9.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $130.70 per share, Huron trades at 14.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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