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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Spectrum Brands (SPB)
Market Cap: $1.26 billion
A leader in multiple consumer product categories, Spectrum Brands (NYSE: SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.
Why Are We Out on SPB?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Cash burn makes us question whether it can achieve sustainable long-term growth
- ROIC of 0.8% reflects management’s challenges in identifying attractive investment opportunities
At $52.20 per share, Spectrum Brands trades at 13x forward P/E. Read our free research report to see why you should think twice about including SPB in your portfolio.
American Express Global Business Travel (GBTG)
Market Cap: $4.12 billion
Originally spun off from American Express in 2014 but maintaining the Amex GBT brand, Global Business Travel Group (NYSE: GBTG) provides end-to-end business travel and expense management solutions, connecting corporate clients with travel suppliers and offering specialized software services.
Why Should You Sell GBTG?
- Annual revenue growth of 5.7% over the last two years was well below our standards for the software sector
- Estimated sales growth of 5% for the next 12 months is soft and implies weaker demand
- Gross margin of 61.1% reflects its relatively high servicing costs
American Express Global Business Travel’s stock price of $7.81 implies a valuation ratio of 1.4x forward price-to-sales. Check out our free in-depth research report to learn more about why GBTG doesn’t pass our bar.
One Stock to Watch:
Rumble (RUM)
Market Cap: $2.77 billion
Founded in 2013 as a champion for content creator rights and free expression, Rumble (NASDAQ: RUM) is a video sharing platform that positions itself as a free speech alternative to mainstream platforms, offering creators more favorable revenue-sharing opportunities.
Why Are We Positive On RUM?
- Market share has increased this cycle as its 19% annual revenue growth over the last two years was exceptional
- Projected revenue growth of 7.8% for the next 12 months suggests its momentum from the last two years will persist
Rumble is trading at $8.18 per share, or 20.5x trailing 12-month price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
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