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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.
Two Stocks to Sell:
Carriage Services (CSV)
Market Cap: $708.9 million
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Do We Think Twice About CSV?
- 4.3% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Underwhelming 10% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
Carriage Services is trading at $45.16 per share, or 10.7x forward EV-to-EBITDA. To fully understand why you should be careful with CSV, check out our full research report (it’s free).
Haemonetics (HAE)
Market Cap: $2.60 billion
With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE: HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.
Why Are We Wary of HAE?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Revenue base of $1.35 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Sales are projected to tank by 2.9% over the next 12 months as demand evaporates
At $53.71 per share, Haemonetics trades at 10.8x forward P/E. Check out our free in-depth research report to learn more about why HAE doesn’t pass our bar.
One Stock to Watch:
Watts Water Technologies (WTS)
Market Cap: $9.05 billion
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Are We Fans of WTS?
- Superior product capabilities and pricing power result in a best-in-class gross margin of 45.5%
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 20.7% exceeded its revenue gains over the last five years
Watts Water Technologies’s stock price of $271.20 implies a valuation ratio of 28.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
