The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.

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 three Russell 2000 stocks to steer clear of and some alternatives to watch instead.

fuboTV (FUBO)

Market Cap: $416.2 million

Originally launched as a soccer streaming platform, fuboTV (NYSE: FUBO) is a video streaming service specializing in live sports, news, and entertainment content.

Why Are We Out on FUBO?

1. Sluggish trends in its domestic subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Poor expense management has led to operating margin losses
3. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

fuboTV’s stock price of $1.20 implies a valuation ratio of 1.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including FUBO in your portfolio.

1-800-FLOWERS (FLWS)

Market Cap: $206.9 million

Founded in 1976, 1-800-FLOWERS (NASDAQ: FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

Why Do We Avoid FLWS?

1. Products and services aren't resonating with the market as its revenue declined by 3.1% annually over the last five years
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. High net-debt-to-EBITDA ratio of 11× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $3.28 per share, 1-800-FLOWERS trades at 0.1x forward price-to-sales. To fully understand why you should be careful with FLWS, check out our full research report (it’s free).

DNOW (DNOW)

Market Cap: $2.21 billion

Spun off from National Oilwell Varco, DNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.

Why Are We Hesitant About DNOW?

1. Operating margin of 2.8% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
2. Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 3.7% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

DNOW is trading at $11.87 per share, or 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than DNOW.

High-Quality Stocks for All Market Conditions

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