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 are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Olaplex (OLPX)
Market Cap: $872.4 million
Rising to fame on TikTok because of its “bond building" hair products, Olaplex (NASDAQ: OLPX) offers products and treatments that repair the damage caused by traditional heat and chemical-based styling goods.
Why Is OLPX Risky?
- Annual revenue declines of 14.2% over the last three years indicate problems with its market positioning
- Sales were less profitable over the last three years as its earnings per share fell by 45.3% annually, worse than its revenue declines
- Free cash flow margin shrank by 16.1 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
Olaplex’s stock price of $1.31 implies a valuation ratio of 17.6x forward P/E. If you’re considering OLPX for your portfolio, see our FREE research report to learn more.
Park-Ohio (PKOH)
Market Cap: $239.8 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Do We Think PKOH Will Underperform?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Gross margin of 15.1% reflects its high production costs
- Free cash flow margin dropped by 5.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Park-Ohio is trading at $17.69 per share, or 5.4x forward P/E. Check out our free in-depth research report to learn more about why PKOH doesn’t pass our bar.
Haemonetics (HAE)
Market Cap: $3.38 billion
With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE: HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.
Why Does HAE Worry Us?
- Annual revenue growth of 6.6% over the last five years was below our standards for the healthcare sector
- Subscale operations are evident in its revenue base of $1.36 billion, meaning it has fewer distribution channels than its larger rivals
- Sales are projected to tank by 4.6% over the next 12 months as demand evaporates
At $70.46 per share, Haemonetics trades at 14.3x forward P/E. To fully understand why you should be careful with HAE, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
