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. That said, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
National Vision (EYE)
Market Cap: $2.12 billion
Operating under multiple brands, National Vision (NYSE: EYE) sells optical products such as eyeglasses and provides optical services such as eye exams.
Why Are We Wary of EYE?
- Store closures demonstrate a defensive approach to eliminating underperforming locations
- Operating margin of 1.3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
At $26.69 per share, National Vision trades at 27.7x forward P/E. Dive into our free research report to see why there are better opportunities than EYE.
Columbus McKinnon (CMCO)
Market Cap: $462.6 million
With 19 different brands across the globe, Columbus McKinnon (NASDAQ: CMCO) offers material handling equipment for the construction, manufacturing, and transportation industries.
Why Should You Dump CMCO?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.6 percentage points
- Sales over the last two years were less profitable as its earnings per share fell by 10.5% annually while its revenue was flat
Columbus McKinnon is trading at $16.29 per share, or 9.9x forward P/E. Read our free research report to see why you should think twice about including CMCO in your portfolio.
One Stock to Buy:
Construction Partners (ROAD)
Market Cap: $6.85 billion
Founded in 2001, Construction Partners (NASDAQ: ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
Why Will ROAD Beat the Market?
- Average organic revenue growth of 9.8% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 49.6% over the last two years outstripped its revenue performance
- Free cash flow margin grew by 7.8 percentage points over the last five years, giving the company more chips to play with
Construction Partners’s stock price of $122.01 implies a valuation ratio of 41x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
