The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.

Two Stocks to Sell:

Carter's (CRI)

Market Cap: $1.05 billion

Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE: CRI) is an American designer and marketer of children's apparel.

Why Do We Steer Clear of CRI?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Eroding returns on capital suggest its historical profit centers are aging

At $28.90 per share, Carter's trades at 11.1x forward P/E. Check out our free in-depth research report to learn more about why CRI doesn’t pass our bar.

Mayville Engineering (MEC)

Market Cap: $305 million

Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE: MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.

Why Do We Think Twice About MEC?

1. Annual sales declines of 2% for the past two years show its products and services struggled to connect with the market during this cycle
2. High input costs result in an inferior gross margin of 12.8% that must be offset through higher volumes
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

Mayville Engineering’s stock price of $15.01 implies a valuation ratio of 15.8x forward P/E. To fully understand why you should be careful with MEC, check out our full research report (it’s free).

One Stock to Watch:

DXP (DXPE)

Market Cap: $1.93 billion

Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.

Why Does DXPE Stand Out?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 10.4% annual sales growth over the last five years
2. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 32.6% exceeded its revenue gains over the last two years

DXP is trading at $129.44 per share, or 21.7x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at 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-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

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