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 steer clear of and some alternatives to watch instead.
MarineMax (HZO)
Market Cap: $559.1 million
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE: HZO) sells boats, yachts, and other marine products.
Why Are We Out on HZO?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
MarineMax’s stock price of $26.05 implies a valuation ratio of 9.9x forward P/E. Check out our free in-depth research report to learn more about why HZO doesn’t pass our bar.
Hain Celestial (HAIN)
Market Cap: $161.6 million
Sold in over 75 countries around the world, Hain Celestial (NASDAQ: HAIN) is a natural and organic food company whose products range from snacks to teas to baby food.
Why Is HAIN Risky?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Projected sales decline of 5.5% over the next 12 months indicates demand will continue deteriorating
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
Hain Celestial is trading at $1.90 per share, or 4.2x forward P/E. Read our free research report to see why you should think twice about including HAIN in your portfolio.
OceanFirst Financial (OCFC)
Market Cap: $981.9 million
Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ: OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.
Why Should You Dump OCFC?
- Net interest income trends were unexciting over the last five years as its 1.9% annual growth was below the typical banking firm
- Net interest margin dropped by 41.3 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 5.1% annually
At $17.41 per share, OceanFirst Financial trades at 0.6x forward P/B. Dive into our free research report to see why there are better opportunities than OCFC.
High-Quality Stocks for All Market Conditions
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