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 deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
LiveRamp (RAMP)
Market Cap: $1.92 billion
Started in 2011 as a spin-out of RapLeaf, LiveRamp (NYSE: RAMP) is a software-as-a-service provider that helps companies better target their marketing by merging offline and online data about their customers.
Why Does RAMP Give Us Pause?
- Sales trends were unexciting over the last three years as its 12.9% annual growth was below the typical software company
- Estimated sales growth of 7.1% for the next 12 months implies demand will slow from its three-year trend
LiveRamp’s stock price of $29.27 implies a valuation ratio of 2.5x forward price-to-sales. Check out our free in-depth research report to learn more about why RAMP doesn’t pass our bar.
OPENLANE (KAR)
Market Cap: $2.38 billion
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE: KAR) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Do We Pass on KAR?
- Sales tumbled by 7.9% annually over the last five years, showing market trends are working against its favor during this cycle
- Free cash flow margin shrank by 11.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
OPENLANE is trading at $22.05 per share, or 22.1x forward P/E. Read our free research report to see why you should think twice about including KAR in your portfolio.
One Stock to Watch:
Transcat (TRNS)
Market Cap: $767 million
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Why Do We Watch TRNS?
- Solid 10.1% annual revenue growth over the last two years indicates its offering’s solve complex business issues
- Estimated revenue growth of 10.6% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share grew by 17.1% annually over the last five years and trumped its peers
At $82.39 per share, Transcat trades at 32.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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 6 Stocks for this week. 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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
