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. That said, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Wabash (WNC)
Market Cap: $308.7 million
With its first trailer reportedly built on two sawhorses, Wabash (NYSE: WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.
Why Do We Steer Clear of WNC?
- Backlog has dropped by 36.2% on average over the past two years, suggesting it’s losing orders as competition picks up
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
At $7.56 per share, Wabash trades at 4.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than WNC.
LeMaitre (LMAT)
Market Cap: $2.03 billion
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Is LMAT Not Exciting?
- Subscale operations are evident in its revenue base of $240.9 million, meaning it has fewer distribution channels than its larger rivals
LeMaitre’s stock price of $89.64 implies a valuation ratio of 35x forward P/E. To fully understand why you should be careful with LMAT, check out our full research report (it’s free for active Edge members).
Supernus Pharmaceuticals (SUPN)
Market Cap: $2.55 billion
With a diverse portfolio of eight FDA-approved medications targeting neurological conditions, Supernus Pharmaceuticals (NASDAQ: SUPN) develops and markets treatments for central nervous system disorders including epilepsy, ADHD, Parkinson's disease, and migraine.
Why Are We Out on SUPN?
- Annual revenue growth of 5.7% over the last two years was below our standards for the healthcare sector
- Smaller revenue base of $681.5 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Supernus Pharmaceuticals is trading at $44.48 per share, or 16x forward P/E. Read our free research report to see why you should think twice about including SUPN in your portfolio.
High-Quality Stocks for All Market Conditions
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