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.
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 big thing and one best left off your watchlist.
One Stock to Sell:
Carter's (CRI)
Market Cap: $1.42 billion
Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE: CRI) is an American designer and marketer of children's apparel.
Why Are We Bearish on CRI?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 7.5% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Carter’s stock price of $38.71 implies a valuation ratio of 11.3x forward P/E. To fully understand why you should be careful with CRI, check out our full research report (it’s free).
Two Stocks to Watch:
Asure Software (ASUR)
Market Cap: $244.6 million
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Could ASUR Be a Winner?
- Products and services have many advocates, as seen in its respectable 16.1% annual sales growth over the last two years
- Billings have averaged 26.2% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $8.47 per share, Asure Software trades at 1.5x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Korn Ferry (KFY)
Market Cap: $4.28 billion
With clients including 97% of the S&P 100 and operations in 103 offices across 51 countries, Korn Ferry (NYSE: KFY) is a global consulting firm that helps organizations design optimal structures, recruit talent, develop leaders, and create effective compensation strategies.
Why Are We Positive on KFY?
- Annual revenue growth of 10.1% over the last five years was superb and indicates its market share increased during this cycle
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 26.9% annually
- Industry-leading 19% return on capital demonstrates management’s skill in finding high-return investments
Korn Ferry is trading at $84.18 per share, or 14.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
