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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Amtech (ASYS)
Market Cap: $277.8 million
Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ: ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.
Why Are We Cautious About ASYS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 14.9% annually over the last two years
- Poor free cash flow margin of 8.4% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- ROIC of -0.8% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Amtech’s stock price of $15.85 implies a valuation ratio of 3x trailing 12-month price-to-sales. Read our free research report to see why you should think twice about including ASYS in your portfolio.
Movado (MOV)
Market Cap: $588.5 million
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Should You Sell MOV?
- Annual revenue growth of 3.6% over the last five years was below our standards for the consumer discretionary sector
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $36.51 per share, Movado trades at 11.5x forward EV-to-EBITDA. To fully understand why you should be careful with MOV, check out our full research report (it’s free).
Goodyear (GT)
Market Cap: $2.07 billion
With its iconic blimp floating above major sporting events since 1925, Goodyear (NASDAQ: GT) is one of the world's largest tire manufacturers, producing and selling tires for automobiles, trucks, aircraft, and other vehicles, along with related services.
Why Do We Steer Clear of GT?
- Sales tumbled by 4.9% annually over the last two years, showing market trends are working against it during this cycle
- Issuance of new shares over the last two years caused its earnings per share to fall by 56.8% annually, even worse than its revenue declines
- Cash burn makes us question whether it can achieve sustainable long-term growth
Goodyear is trading at $7.17 per share, or 5.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why GT doesn’t pass our bar.
Stocks We Like More
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
