Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
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 are two Russell 2000 stocks that could deliver strong gains and one best left off your watchlist.
One Stock to Sell:
Oceaneering (OII)
Market Cap: $3.64 billion
Deploying a fleet of 250 tethered underwater robots around the globe, Oceaneering International (NYSE: OII) provides remotely operated underwater vehicles and subsea equipment for offshore energy exploration.
Why Do We Avoid OII?
- Flat sales over the last ten years suggest it must find different ways to grow during this cycle
- Gross margin of 17.4% is below its competitors, leaving less money to invest in exploration and production
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.7% for the last five years
Oceaneering’s stock price of $36.85 implies a valuation ratio of 1.3x forward price-to-sales. To fully understand why you should be careful with OII, check out our full research report (it’s free).
Two Stocks to Watch:
CarGurus (CARG)
Market Cap: $3.31 billion
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Does CARG Stand Out?
- Superior platform functionality and low servicing costs are reflected in its best-in-class gross margin of 87.7%
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 32.5% annually
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
CarGurus is trading at $34.75 per share, or 10.9x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Kratos (KTOS)
Market Cap: $10.86 billion
Established with a commitment to supporting national security, Kratos (NASDAQ: KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Why Should KTOS Be on Your Watchlist?
- Average organic revenue growth of 14.6% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Projected revenue growth of 29.7% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share have massively outperformed its peers over the last two years, increasing by 15.8% annually
At $57.91 per share, Kratos trades at 71.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
