Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
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 be the next big thing and two best left off your watchlist.
Two Stocks to Sell:
BeautyHealth (SKIN)
Market Cap: $164.9 million
Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ: SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.
Why Is SKIN Risky?
- Products aren't resonating with the market as its revenue declined by 1.6% annually over the last three years
- Smaller revenue base of $310.1 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Historical operating margin losses point to an inefficient cost structure
BeautyHealth is trading at $1.29 per share, or 6.4x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SKIN.
Enovis (ENOV)
Market Cap: $1.86 billion
With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE: ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.
Why Are We Out on ENOV?
- Sales tumbled by 7.1% annually over the last five years, showing market trends are working against its favor during this cycle
- Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Enovis’s stock price of $32.54 implies a valuation ratio of 10.2x forward P/E. To fully understand why you should be careful with ENOV, check out our full research report (it’s free for active Edge members).
One Stock to Buy:
Construction Partners (ROAD)
Market Cap: $6.51 billion
Founded in 2001, Construction Partners (NASDAQ: ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
Why Should You Buy ROAD?
- Market share will likely rise over the next 12 months as its expected revenue growth of 29.2% is robust
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 70.6% annually, topping its revenue gains
- Free cash flow margin expanded by 5.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $115.80 per share, Construction Partners trades at 42.3x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. 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
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