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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here are three Russell 2000 stocks to avoid and better alternatives to consider.
FormFactor (FORM)
Market Cap: $2.80 billion
With customers across the foundry and fabless markets, FormFactor (NASDAQ: FORM) is a US-based provider of test and measurement technologies for semiconductors.
Why Do We Think FORM Will Underperform?
- Sales trends were unexciting over the last five years as its 3.7% annual growth was below the typical semiconductor company
- Free cash flow margin shrank by 13.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- ROIC of 9% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $36.25 per share, FormFactor trades at 26.8x forward P/E. If you’re considering FORM for your portfolio, see our FREE research report to learn more.
Monro (MNRO)
Market Cap: $547.1 million
Started as a single location in Rochester, New York, Monro (NASDAQ: MNRO) provides common auto services such as brake repairs, tire replacements, and oil changes.
Why Is MNRO Risky?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 6 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Monro is trading at $18.25 per share, or 25.7x forward P/E. Dive into our free research report to see why there are better opportunities than MNRO.
Fresh Del Monte Produce (FDP)
Market Cap: $1.66 billion
Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE: FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.
Why Are We Out on FDP?
- Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 8.3%
- ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities
Fresh Del Monte Produce’s stock price of $34.36 implies a valuation ratio of 15.3x forward EV-to-EBITDA. To fully understand why you should be careful with FDP, check out our full research report (it’s free).
Stocks We Like 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-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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
