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. That said, here are three Russell 2000 stocks to avoid and better alternatives to consider.
Academy Sports (ASO)
Market Cap: $2.70 billion
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ: ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Why Does ASO Worry Us?
- Muted 4.2% annual revenue growth over the last five years shows its demand lagged behind its consumer retail peers
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 1.9 percentage points
Academy Sports is trading at $40.98 per share, or 6.2x forward P/E. Check out our free in-depth research report to learn more about why ASO doesn’t pass our bar.
Hanesbrands (HBI)
Market Cap: $1.73 billion
A classic American staple founded in 1901, Hanesbrands (NYSE: HBI) is a clothing company known for its array of basic apparel including innerwear and activewear.
Why Is HBI Risky?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Sales are projected to tank by 1.3% over the next 12 months as its demand continues evaporating
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 19% annually, worse than its revenue
At $4.91 per share, Hanesbrands trades at 9.4x forward P/E. Read our free research report to see why you should think twice about including HBI in your portfolio.
Brink's (BCO)
Market Cap: $3.46 billion
Known for its iconic armored trucks that have been a fixture in American cities since 1859, Brink's (NYSE: BCO) provides secure transportation and management of cash and valuables for banks, retailers, and other businesses worldwide.
Why Do We Think Twice About BCO?
- Sales trends were unexciting over the last two years as its 4% annual growth was below the typical business services company
- Free cash flow margin shrank by 3.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Low returns on capital reflect management’s struggle to allocate funds effectively
Brink’s stock price of $82.37 implies a valuation ratio of 11x forward P/E. To fully understand why you should be careful with BCO, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
