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.
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 two Russell 2000 stocks that could be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
Sinclair (SBGI)
Market Cap: $1.14 billion
With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ: SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.
Why Do We Think SBGI Will Underperform?
- Sales tumbled by 11.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Eroding returns on capital suggest its historical profit centers are aging
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Sinclair’s stock price of $16.31 implies a valuation ratio of 8.8x forward EV-to-EBITDA. If you’re considering SBGI for your portfolio, see our FREE research report to learn more.
Two Stocks to Buy:
Federal Signal (FSS)
Market Cap: $6.77 billion
Developing sirens that warned of air raid attacks or fallout during the Cold War, Federal Signal (NYSE: FSS) provides safety and emergency equipment for government agencies, municipalities, and industrial companies.
Why Are We Bullish on FSS?
- Annual revenue growth of 12.3% over the last five years was superb and indicates its market share increased during this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 15.4%
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 27.9% annually, topping its revenue gains
Federal Signal is trading at $111.32 per share, or 24.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Astronics (ATRO)
Market Cap: $1.87 billion
Integrating power outlets into many Boeing aircraft, Astronics (NASDAQ: ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries.
Why Is ATRO a Good Business?
- Market share has increased this cycle as its 12.9% annual revenue growth over the last two years was exceptional
- Free cash flow margin grew by 10.4 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
At $52.50 per share, Astronics trades at 22.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
