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.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.

Two Stocks to Sell:

Matson (MATX)

Market Cap: $3.65 billion

Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.

Why Are We Hesitant About MATX?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 5.3% annually over the last two years
2. Earnings per share have dipped by 11.6% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Waning returns on capital imply its previous profit engines are losing steam

Matson’s stock price of $111.87 implies a valuation ratio of 11.2x forward P/E. Read our free research report to see why you should think twice about including MATX in your portfolio.

Peoples Bancorp (PEBO)

Market Cap: $1.01 billion

Founded in 1902 in Ohio and expanding through both organic growth and acquisitions, Peoples Bancorp (NASDAQ: PEBO) is a financial holding company that provides banking, insurance, equipment leasing, and investment services to consumers and businesses.

Why Does PEBO Worry Us?

1. Demand will likely fall over the next 12 months as Wall Street expects flat net interest income
2. Tangible book value per share stagnated over the last five years and signals the need for new capital management strategies
3. Annual interest expenses are high relative to its profits, increasing the probability of its failure to meet certain borrowing obligations

Peoples Bancorp is trading at $29.05 per share, or 0.9x forward P/B. If you’re considering PEBO for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

SPX Technologies (SPXC)

Market Cap: $7.24 billion

SPX Technologies (NYSE: SPXC) is an industrial conglomerate catering to the energy, manufacturing, automotive, and aerospace sectors.

Why Are We Fans of SPXC?

1. Market share has increased this cycle as its 13.5% annual revenue growth over the last two years was exceptional
2. Operating margin expanded by 7.6 percentage points over the last five years as it scaled and became more efficient
3. Earnings growth has trumped its peers over the last two years as its EPS has compounded at 25.5% annually

At $155.05 per share, SPX Technologies trades at 24.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

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