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 the next big thing and two that may struggle to keep up.
Two Stocks to Sell:
Alamo (ALG)
Market Cap: $1.85 billion
Expanding its markets through acquisitions since its founding, Alamo (NYSE: ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.
Why Does ALG Fall Short?
- Annual sales declines of 2.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.5%
- Earnings per share have dipped by 9.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Alamo’s stock price of $151.67 implies a valuation ratio of 14.1x forward P/E. Check out our free in-depth research report to learn more about why ALG doesn’t pass our bar.
Customers Bancorp (CUBI)
Market Cap: $2.46 billion
Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE: CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.
Why Are We Hesitant About CUBI?
- Annual revenue growth of 7.6% over the last two years was below our standards for the banking sector
- Weak unit economics are reflected in its net interest margin of 3.3%, one of the worst among bank companies
- Performance over the past two years shows its incremental sales were less profitable, as its 3.1% annual earnings per share growth trailed its revenue gains
Customers Bancorp is trading at $72.62 per share, or 1x forward P/B. Read our free research report to see why you should think twice about including CUBI in your portfolio.
One Stock to Watch:
First BanCorp (FBP)
Market Cap: $3.55 billion
Tracing its roots back to 1948 in San Juan, First BanCorp (NYSE: FBP) is a bank holding company that provides commercial banking, consumer financing, mortgage services, and insurance products across Puerto Rico, the U.S. mainland, and the Caribbean.
Why Do We Like FBP?
- Non-interest operating profits increased over the last five years as the firm gained some leverage on its fixed costs and became more efficient
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $23.09 per share, First BanCorp trades at 1.7x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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