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.

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 is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.

Two Stocks to Sell:

ACV Auctions (ACVA)

Market Cap: $2.62 billion

Founded in 2014, ACV Auctions (NASDAQ: ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.

Why Does ACVA Give Us Pause?

1. Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 25.1%
2. Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
3. Low free cash flow margin of 0.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

ACV Auctions’s stock price of $15.32 implies a valuation ratio of 28.6x forward EV/EBITDA. If you’re considering ACVA for your portfolio, see our FREE research report to learn more.

Driven Brands (DRVN)

Market Cap: $2.85 billion

With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ: DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.

Why Does DRVN Fall Short?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Driven Brands is trading at $17.33 per share, or 13.5x forward P/E. Check out our free in-depth research report to learn more about why DRVN doesn’t pass our bar.

One Stock to Buy:

Verra Mobility (VRRM)

Market Cap: $3.98 billion

Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.

Why Do We Love VRRM?

1. Impressive 13.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Offerings are mission-critical for businesses and result in a best-in-class gross margin of 62.1%
3. Robust free cash flow margin of 20% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety

At $25 per share, Verra Mobility trades at 18.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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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