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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Revolve (RVLV)
Market Cap: $2.17 billion
Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ: RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.
Why Should You Dump RVLV?
- Competition may be pulling attention away from its platform as its 5.7% average growth in active customers was choppy
- Demand has been weak recently as it posted disappointing growth in its average revenue per buyer and struggled to expand its platform
- Earnings per share have contracted by 10.5% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Revolve is trading at $30.37 per share, or 21.1x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than RVLV.
Pediatrix Medical Group (MD)
Market Cap: $1.84 billion
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Does MD Worry Us?
- Poor comparable store sales performance over the past two years indicates it’s having trouble bringing new patients into its facilities
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.1%
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $21.86 per share, Pediatrix Medical Group trades at 10.1x forward P/E. Check out our free in-depth research report to learn more about why MD doesn’t pass our bar.
Perella Weinberg (PWP)
Market Cap: $1.46 billion
Founded in 2006 by veteran investment bankers Joseph Perella and Peter Weinberg during a wave of boutique advisory firm launches, Perella Weinberg Partners (NASDAQ: PWP) is a global independent advisory firm that provides strategic and financial advice to corporations, financial sponsors, and government institutions.
Why Are We Out on PWP?
- Earnings per share have dipped by 30% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Negative return on equity shows management lost money while trying to expand the business
Perella Weinberg’s stock price of $21.84 implies a valuation ratio of 25.5x forward P/E. If you’re considering PWP for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
