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. Keeping that in mind, here are two Russell 2000 stocks that could be the next big thing and one that may struggle to keep up.
One Stock to Sell:
EverQuote (EVER)
Market Cap: $656.9 million
Aiming to simplify a once complicated process, EverQuote (NASDAQ: EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers
Why Does EVER Give Us Pause?
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
EverQuote’s stock price of $18.65 implies a valuation ratio of 3.7x forward EV/EBITDA. Read our free research report to see why you should think twice about including EVER in your portfolio.
Two Stocks to Watch:
Casella Waste Systems (CWST)
Market Cap: $5.23 billion
Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ: CWST) offers waste management services for businesses, residents, and the government.
Why Should CWST Be on Your Watchlist?
- Impressive 16.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Estimated revenue growth of 12.1% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share have massively outperformed its peers over the last two years, increasing by 38.3% annually
At $82.73 per share, Casella Waste Systems trades at 67.4x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
HCI Group (HCI)
Market Cap: $2.18 billion
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE: HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
What Makes HCI Stand Out?
- Market penetration was impressive this cycle as its net premiums earned expanded by 15.5% annually over the last two years
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 36.3% outpaced its revenue gains
- Annual book value per share growth of 42.4% over the past two years was outstanding, reflecting strong capital accumulation this cycle
HCI Group is trading at $174.42 per share, or 1.8x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
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