The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
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 a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
Bloomin' Brands (BLMN)
Market Cap: $762.1 million
Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ: BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Do We Pass on BLMN?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Sales are projected to tank by 4.8% over the next 12 months as demand evaporates further
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Bloomin' Brands’s stock price of $8.90 implies a valuation ratio of 6.9x forward P/E. Read our free research report to see why you should think twice about including BLMN in your portfolio.
Dine Brands (DIN)
Market Cap: $418.8 million
Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Should You Sell DIN?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Sales over the last six years were less profitable as its earnings per share fell by 10.1% annually while its revenue was flat
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Dine Brands is trading at $26.80 per share, or 5.2x forward P/E. Dive into our free research report to see why there are better opportunities than DIN.
One Stock to Watch:
Astrana Health (ASTH)
Market Cap: $1.21 billion
Formerly known as Apollo Medical Holdings until early 2024, Astrana Health (NASDAQ: ASTH) operates a technology-powered healthcare platform that enables physicians to deliver coordinated care while successfully participating in value-based payment models.
Why Could ASTH Be a Winner?
- Annual revenue growth of 35.9% over the last two years was superb and indicates its market share increased during this cycle
- Market share will likely rise over the next 12 months as its expected revenue growth of 19.6% is robust
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 25% annually
At $24.26 per share, Astrana Health trades at 6x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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