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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, 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:
ACV Auctions (ACVA)
Market Cap: $1.15 billion
Founded in 2014, ACV Auctions (NYSE: ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.
Why Are We Cautious About ACVA?
- Gross margin of 27.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
- Low free cash flow margin of 3.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
ACV Auctions’s stock price of $6.78 implies a valuation ratio of 12.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including ACVA in your portfolio.
Harley-Davidson (HOG)
Market Cap: $2.89 billion
Founded in 1903, Harley-Davidson (NYSE: HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.
Why Do We Pass on HOG?
- Performance surrounding its motorcycles sold has lagged its peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 7.9% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $27.62 per share, Harley-Davidson trades at 19x forward P/E. To fully understand why you should be careful with HOG, check out our full research report (it’s free).
One Stock to Buy:
Huron (HURN)
Market Cap: $2.33 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 Will HURN Beat the Market?
- Annual revenue growth of 16.4% over the last five years was superb and indicates its market share increased during this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 23% exceeded its revenue gains over the last two years
- Free cash flow margin increased by 7.6 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Huron is trading at $156.64 per share, or 16.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
