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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Atkore (ATKR)
Market Cap: $2.30 billion
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
Why Do We Pass on ATKR?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Sales were less profitable over the last two years as its earnings per share fell by 31.5% annually, worse than its revenue declines
- Waning returns on capital imply its previous profit engines are losing steam
Atkore’s stock price of $68.31 implies a valuation ratio of 10.6x forward P/E. If you’re considering ATKR for your portfolio, see our FREE research report to learn more.
Belden (BDC)
Market Cap: $4.38 billion
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE:BDC) designs, manufactures, and sells electronic components to various industries.
Why Are We Wary of BDC?
- Annual sales declines of 1.7% 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 4.3%
- Flat earnings per share over the last two years underperformed the sector average
At $110.81 per share, Belden trades at 15.3x forward P/E. Dive into our free research report to see why there are better opportunities than BDC.
EVgo (EVGO)
Market Cap: $536.7 million
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ:EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Do We Think Twice About EVGO?
- Historically negative EPS casts doubt for cautious investors and clouds its long-term earnings prospects
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
EVgo is trading at $4.03 per share, or 34x forward EV-to-EBITDA. To fully understand why you should be careful with EVGO, check out our full research report (it’s free).
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.