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 three Russell 2000 stocks that don’t make the cut and some better choices instead.
Spectrum Brands (SPB)
Market Cap: $1.94 billion
A leader in multiple consumer product categories, Spectrum Brands (NYSE: SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.
Why Do We Avoid SPB?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales growth of 1.9% for the next 12 months suggests sluggish demand
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $82.30 per share, Spectrum Brands trades at 17.3x forward P/E. Dive into our free research report to see why there are better opportunities than SPB.
Guardant Health (GH)
Market Cap: $17.36 billion
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ: GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Why Are We Cautious About GH?
- Revenue base of $1.08 billion indicates it’s still subscale compared to its larger peers (though this creates opportunities to expand into untapped markets)
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
Guardant Health’s stock price of $132 implies a valuation ratio of 12.4x forward price-to-sales. Read our free research report to see why you should think twice about including GH in your portfolio.
Comstock Resources (CRK)
Market Cap: $3.87 billion
Operating in the Haynesville shale where a single well can produce millions of cubic feet of gas daily, Comstock Resources (NYSE: CRK) drills for and produces natural gas from underground shale rock formations in Louisiana and Texas.
Why Do We Think CRK Will Underperform?
- Muted 5.7% annual revenue growth over the last five years shows its demand lagged behind its energy upstream and integrated energy peers
- Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 6.1 percentage points
- Negative free cash flow raises questions about the return timeline for its investments
Comstock Resources is trading at $13.10 per share, or 18.1x forward P/E. To fully understand why you should be careful with CRK, check out our full research report (it’s free).
Stocks We Like More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
