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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are two Russell 2000 stocks that could be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
Atkore (ATKR)
Market Cap: $2.03 billion
Protecting the things that power our world, Atkore (NYSE: ATKR) designs and manufactures electrical safety products.
Why Do We Think ATKR Will Underperform?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.8 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
Atkore is trading at $59.28 per share, or 9.8x forward P/E. Dive into our free research report to see why there are better opportunities than ATKR.
Two Stocks to Buy:
Powell (POWL)
Market Cap: $3.59 billion
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Should You Buy POWL?
- Annual revenue growth of 28.7% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 124% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin grew by 12.8 percentage points over the last five years, giving the company more chips to play with
Powell’s stock price of $300 implies a valuation ratio of 20.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Skyward Specialty Insurance (SKWD)
Market Cap: $1.92 billion
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ: SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Why Is SKWD a Good Business?
- Market penetration was impressive this cycle as its net premiums earned expanded by 28.2% annually over the last two years
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 46.9% annually, topping its revenue gains
- Annual book value per share growth of 26.6% over the last two years was superb and indicates its capital strength increased during this cycle
At $47.37 per share, Skyward Specialty Insurance trades at 2.1x forward P/B. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% 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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