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. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Pangaea (PANL)
Market Cap: $441.8 million
Established in 1996, Pangaea Logistics (NASDAQ: PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.
Why Does PANL Fall Short?
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 19.1%
- Earnings per share fell by 42.3% annually over the last two years while its revenue grew, partly because it diluted shareholders
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $6.84 per share, Pangaea trades at 3.4x forward EV-to-EBITDA. If you’re considering PANL for your portfolio, see our FREE research report to learn more.
Mercury Systems (MRCY)
Market Cap: $4.01 billion
Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Should You Sell MRCY?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.6 percentage points
- Issuance of new shares over the last five years caused its earnings per share to fall by 18.3% annually while its revenue grew
Mercury Systems is trading at $66.92 per share, or 66.6x forward P/E. Read our free research report to see why you should think twice about including MRCY in your portfolio.
Great Lakes Dredge & Dock (GLDD)
Market Cap: $790.9 million
Founded as Lydon & Drews dredging company, Great Lakes Dredge & Dock (NASDAQ: GLDD) provides dredging services, land reclamation, and coastal protection projects in the United States and internationally.
Why Are We Hesitant About GLDD?
- Average backlog growth of 4.2% over the past two years was mediocre and suggests fewer customers signed long-term contracts
- Gross margin of 16.9% reflects its high production costs
- Cash burn makes us question whether it can achieve sustainable long-term growth
Great Lakes Dredge & Dock’s stock price of $11.85 implies a valuation ratio of 12.4x forward P/E. To fully understand why you should be careful with GLDD, check out our full research report (it’s free for active Edge members).
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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.
