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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
Alarm.com (ALRM)
Market Cap: $2.22 billion
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ: ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Why Should You Dump ALRM?
- Products, pricing, or go-to-market strategy may need some adjustments as its 7.2% average billings growth over the last year was weak
- Estimated sales growth of 4.9% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 1.7 percentage points over the last year as it scaled and became more efficient
Alarm.com is trading at $44.69 per share, or 2.4x forward price-to-sales. If you’re considering ALRM for your portfolio, see our FREE research report to learn more.
FB Financial (FBK)
Market Cap: $2.90 billion
Founded in 1906 and operating through more than a century of economic cycles, FB Financial (NYSE: FBK) operates FirstBank, providing commercial and consumer banking services across Tennessee, Kentucky, Alabama, and North Georgia.
Why Does FBK Worry Us?
- Sales trends were unexciting over the last five years as its 1.9% annual growth was below the typical banking company
- Estimated net interest income growth of 4.9% for the next 12 months implies demand will slow from its five-year trend
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.4% annually
FB Financial’s stock price of $55.91 implies a valuation ratio of 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than FBK.
One Stock to Watch:
Ibotta (IBTA)
Market Cap: $759 million
Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE: IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.
Why Do We Watch IBTA?
- Annual revenue growth of 23.3% over the past three years was outstanding, reflecting market share gains this cycle
- Adjusted operating profits increased over the last four years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow margin increased by 47.8 percentage points over the last four years, giving the company more capital to invest or return to shareholders
At $31.16 per share, Ibotta trades at 22.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
