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. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.

GEO Group (GEO)

Market Cap: $3.64 billion

With a global footprint spanning three continents and approximately 81,000 beds across 100 facilities, GEO Group (NYSE: GEO) operates secure facilities, processing centers, and reentry services for government agencies in the United States, Australia, and South Africa.

Why Do We Avoid GEO?

1. Sales stagnated over the last five years and signal the need for new growth strategies
2. Earnings per share fell by 31.5% annually over the last five years while its revenue was flat, showing each sale was less profitable
3. Free cash flow margin dropped by 8.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up

GEO Group’s stock price of $26.08 implies a valuation ratio of 14.8x forward P/E. Read our free research report to see why you should think twice about including GEO in your portfolio.

10x Genomics (TXG)

Market Cap: $1.54 billion

Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ: TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.

Why Are We Out on TXG?

1. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
2. Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

10x Genomics is trading at $12.80 per share, or 2.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than TXG.

Lumen (LUMN)

Market Cap: $4.72 billion

With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE: LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.

Why Should You Sell LUMN?

1. Annual sales declines of 9.4% for the past five years show its products and services struggled to connect with the market during this cycle
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.5 percentage points
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $4.65 per share, Lumen trades at 1.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why LUMN doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 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-small-cap company Comfort Systems (+782% 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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