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 that may struggle to keep up.
Two Stocks to Sell:
PubMatic (PUBM)
Market Cap: $801.4 million
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ: PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Is PUBM Risky?
- Net revenue retention rate of 96% shows it has a tough time retaining customers
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 11.5 percentage points
PubMatic’s stock price of $17.64 implies a valuation ratio of 2.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PUBM.
Wolverine Worldwide (WWW)
Market Cap: $1.73 billion
Founded in 1883, Wolverine Worldwide (NYSE: WWW) is a global footwear company with a diverse portfolio of brands including Merrell, Hush Puppies, and Saucony.
Why Are We Out on WWW?
- Products and services have few die-hard fans as sales have declined by 1.9% annually over the last five years
- Earnings per share have dipped by 2.2% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Low free cash flow margin of 8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Wolverine Worldwide is trading at $21.13 per share, or 11.3x forward P/E. Read our free research report to see why you should think twice about including WWW in your portfolio.
One Stock to Buy:
Abercrombie and Fitch (ANF)
Market Cap: $4.80 billion
Founded as an outdoor and sporting brand, Abercrombie & Fitch (NYSE: ANF) evolved to become a specialty retailer that sells its own brand of fashionable clothing to young adults.
Why Should You Buy ANF?
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 7.3% growth over the past two years
- Its collection of products is difficult to replicate at scale and leads to a best-in-class gross margin of 62.4%
- Share buybacks catapulted its annual earnings per share growth to 147%, which outperformed its revenue gains over the last three years
At $108.13 per share, Abercrombie and Fitch trades at 10x 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
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
