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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. Keeping that in mind, here are two Russell 2000 stocks that could be the next breakout winners and one best left off your watchlist.
One Stock to Sell:
Greenbrier (GBX)
Market Cap: $1.39 billion
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE: GBX) supplies the freight rail transportation industry with railcars and related services.
Why Do We Avoid GBX?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.7% annually over the last two years
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 13.3%
- Free cash flow margin dropped by 12 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $44.32 per share, Greenbrier trades at 6.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than GBX.
Two Stocks to Watch:
Cal-Maine (CALM)
Market Cap: $4.66 billion
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Could CALM Be a Winner?
- Remarkable 35.3% revenue growth over the last three years demonstrates its ability to capture significant market share
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 280% outpaced its revenue gains
- Robust free cash flow margin of 17.9% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Cal-Maine is trading at $94.61 per share, or 9.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Verra Mobility (VRRM)
Market Cap: $3.74 billion
Managing over 165 million tolling transactions per year, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.
Why Is VRRM a Good Business?
- Annual revenue growth of 13.8% over the past five years was outstanding, reflecting market share gains this cycle
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 62.1%
- VRRM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
Verra Mobility’s stock price of $23.46 implies a valuation ratio of 17.2x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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.
