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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
PagerDuty (PD)
Market Cap: $1.51 billion
Born from the frustration of developers being woken up by unprioritized alerts, PagerDuty (NYSE: PD) is a digital operations management platform that helps organizations detect and respond to IT incidents, outages, and other critical issues in real-time.
Why Are We Hesitant About PD?
- Average billings growth of 5.9% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 5.8% for the next 12 months implies demand will slow from its two-year trend
- Poor expense management has led to operating margin losses
PagerDuty’s stock price of $15.90 implies a valuation ratio of 3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PD.
ePlus (PLUS)
Market Cap: $1.84 billion
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Why Do We Pass on PLUS?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Estimated sales decline of 3.1% for the next 12 months implies an even more challenging demand environment
- Earnings per share have dipped by 6.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
ePlus is trading at $69.62 per share, or 17.5x forward P/E. If you’re considering PLUS for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Huron (HURN)
Market Cap: $2.33 billion
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
Why Are We Backing HURN?
- Annual revenue growth of 10.9% over the past two years was outstanding, reflecting market share gains this cycle
- Adjusted operating margin improvement of 7.5 percentage points over the last five years demonstrates its ability to scale efficiently
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 27.8% exceeded its revenue gains over the last two years
At $147.91 per share, Huron trades at 18.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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