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. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two best left off your watchlist.
Two Stocks to Sell:
Compass (COMP)
Market Cap: $6.83 billion
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE:COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Are We Out on COMP?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 14% for the last five years
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Low free cash flow margin of 1.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Compass is trading at $9.13 per share, or 9.5x forward P/E. If you’re considering COMP for your portfolio, see our FREE research report to learn more.
Perella Weinberg (PWP)
Market Cap: $1.21 billion
Founded in 2006 by veteran investment bankers Joseph Perella and Peter Weinberg during a wave of boutique advisory firm launches, Perella Weinberg Partners (NASDAQ:PWP) is a global independent advisory firm that provides strategic and financial advice to corporations, financial sponsors, and government institutions.
Why Do We Steer Clear of PWP?
- Sales tumbled by 1.3% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share have contracted by 13.9% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 207% annually over the last five years
Perella Weinberg’s stock price of $16.44 implies a valuation ratio of 11.2x forward P/E. Check out our free in-depth research report to learn more about why PWP doesn’t pass our bar.
One Stock to Buy:
Plexus (PLXS)
Market Cap: $7.09 billion
With over 20,000 team members across 26 global facilities, Plexus (NASDAQ:PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.
Why Will PLXS Outperform?
- Solid 8.1% annual revenue growth over the last two years indicates its offerings solve complex business issues
- Projected revenue growth of 20.6% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $269 per share, Plexus trades at 26.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.