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.

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 two Russell 2000 stocks that could be the next breakout winners and one that may face some trouble.

One Stock to Sell:

Ducommun (DCO)

Market Cap: $1.38 billion

California’s oldest company, Ducommun (NYSE: DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.

Why Do We Think Twice About DCO?

1. Average backlog growth of 3.8% over the past two years was mediocre and suggests fewer customers signed long-term contracts
2. Poor free cash flow margin of 1.4% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Ducommun’s stock price of $92.36 implies a valuation ratio of 22.7x forward P/E. Read our free research report to see why you should think twice about including DCO in your portfolio.

Two Stocks to Watch:

Planet Labs (PL)

Market Cap: $2.05 billion

Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE: PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.

Why Does PL Stand Out?

1. Impressive 21.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Additional sales over the last two years increased its profitability as the 27% annual growth in its earnings per share outpaced its revenue
3. Historical investments are beginning to pay off as its returns on capital are growing

Planet Labs is trading at $6.77 per share, or 7.1x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

UMB Financial (UMBF)

Market Cap: $8.86 billion

With roots dating back to 1913 and a name derived from "United Missouri Bank," UMB Financial (NASDAQ: UMBF) is a financial holding company that provides banking, asset management, and fund services to commercial, institutional, and individual customers.

Why Could UMBF Be a Winner?

1. Annual net interest income growth of 19.7% over the past five years was outstanding, reflecting market share gains this cycle
2. Demand for the next 12 months is expected to accelerate above its five-year trend as Wall Street forecasts robust net interest income growth of 37.8%
3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 15.3% annually

At $116.68 per share, UMB Financial trades at 1.2x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out 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 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 Exlservice (+354% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.