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 are three Russell 2000 stocks to avoid and better alternatives to consider.

Brinker International (EAT)

Market Cap: $7.46 billion

Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.

Why Does EAT Fall Short?

1. Slow expansion of restaurants indicates a strategic shift toward maximizing returns from existing locations
2. Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its six-year trend
3. Gross margin of 17.7% is below its competitors, leaving less money for marketing and promotions

Brinker International is trading at $170.35 per share, or 14.9x forward P/E. To fully understand why you should be careful with EAT, check out our full research report (it’s free).

Custom Truck One Source (CTOS)

Market Cap: $1.56 billion

Inspired by a family gas station, Custom Truck One Source (NYSE: CTOS) is a distributor of trucks and heavy equipment.

Why Does CTOS Give Us Pause?

1. Annual revenue growth of 2.9% over the last two years was below our standards for the industrials sector
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Free cash flow margin shrank by 19.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $6.90 per share, Custom Truck One Source trades at 8x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CTOS.

Camden National Bank (CAC)

Market Cap: $848.6 million

Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ: CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.

Why Do We Think Twice About CAC?

1. 8.3% annual net interest income growth over the last five years was slower than its banking peers
2. Incremental sales over the last five years were less profitable as its 1.7% annual earnings per share growth lagged its revenue gains
3. Tangible book value per share was flat over the last five years, indicating it’s failed to build equity value this cycle

Camden National Bank’s stock price of $50.17 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why CAC doesn’t pass our bar.

Stocks We Like More

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The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.