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.
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:
CTS (CTS)
Market Cap: $1.23 billion
With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE: CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.
Why Do We Think Twice About CTS?
- Sales tumbled by 3.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 3.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Diminishing returns on capital suggest its earlier profit pools are drying up
CTS’s stock price of $42.50 implies a valuation ratio of 17.9x forward P/E. If you’re considering CTS for your portfolio, see our FREE research report to learn more.
Home Bancshares (HOMB)
Market Cap: $5.56 billion
Founded in Conway, Arkansas in 1998 and growing through strategic acquisitions across the Southeast, Home Bancshares (NYSE: HOMB) operates as the bank holding company for Centennial Bank, providing commercial and retail banking services to businesses and individuals across multiple states.
Why Does HOMB Fall Short?
- Annual net interest income growth of 8.9% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 3.5% for the next 12 months implies demand will slow from its five-year trend
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4.8% annually
At $28.30 per share, Home Bancshares trades at 1.3x forward P/B. Read our free research report to see why you should think twice about including HOMB in your portfolio.
One Stock to Watch:
iRhythm (IRTC)
Market Cap: $5.89 billion
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Are We Fans of IRTC?
- Annual revenue growth of 23.4% over the past five years was outstanding, reflecting market share gains this cycle
- Adjusted operating margin expanded by 17.1 percentage points over the last five years as it scaled and became more efficient
- Free cash flow turned positive over the last five years, indicating the company has passed a significant test
iRhythm is trading at $182.25 per share, or 68.3x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
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 Comfort Systems (+782% 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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