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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
Tenable (TENB)
Market Cap: $3.59 billion
Starting with the widely-used Nessus vulnerability scanner first released in 1998, Tenable (NASDAQ: TENB) provides exposure management solutions that help organizations identify, assess, and prioritize cybersecurity vulnerabilities across their IT infrastructure and cloud environments.
Why Does TENB Give Us Pause?
- Revenue increased by 15.8% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 7.4% for the next 12 months implies demand will slow from its three-year trend
- Free cash flow margin is forecasted to shrink by 1.5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Tenable’s stock price of $29.62 implies a valuation ratio of 3.5x forward price-to-sales. To fully understand why you should be careful with TENB, check out our full research report (it’s free).
Sprinklr (CXM)
Market Cap: $1.90 billion
With a proprietary AI engine processing 450 million data points daily across 30+ digital channels, Sprinklr (NYSE: CXM) provides cloud-based software that helps large enterprises manage customer experiences across social, messaging, chat, and voice channels.
Why Are We Wary of CXM?
- Products, pricing, or go-to-market strategy may need some adjustments as its 3.1% average billings growth over the last year was weak
- Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 69.9% reflects its relatively high servicing costs
Sprinklr is trading at $7.80 per share, or 2.4x forward price-to-sales. If you’re considering CXM for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Bowhead Specialty (BOW)
Market Cap: $908.4 million
Named after the Arctic bowhead whale known for navigating challenging waters, Bowhead Specialty Holdings (NYSE: BOW) is a specialty insurance company that provides customized coverage for complex and high-risk commercial sectors.
Why Are We Backing BOW?
- Net premiums earned expanded by 39.9% annually over the last two years, demonstrating exceptional market penetration this cycle
- Notable projected revenue growth of 22.1% for the next 12 months hints at market share gains
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 53.7% annually, topping its revenue gains
At $27.71 per share, Bowhead Specialty trades at 2.1x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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