The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Callaway Golf Company (CALY)
Market Cap: $2.62 billion
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE: CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Do We Avoid CALY?
- Annual revenue declines of 2.5% over the last five years indicate problems with its market positioning
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 11.5 percentage points
- ROIC hasn’t moved, making investors question whether its recent investments can increase profitability
Callaway Golf Company’s stock price of $14.69 implies a valuation ratio of 16.7x forward P/E. To fully understand why you should be careful with CALY, check out our full research report (it’s free).
Amphastar Pharmaceuticals (AMPH)
Market Cap: $1.00 billion
Founded in 1996 and known for its expertise in complex drug formulations, Amphastar Pharmaceuticals (NASDAQ: AMPH) develops and manufactures technically challenging injectable and inhalation medications, including both generic and proprietary pharmaceutical products.
Why Are We Wary of AMPH?
- Annual revenue growth of 1.2% over the last two years was below our standards for the healthcare sector
- Subscale operations are evident in its revenue base of $730 million, meaning it has fewer distribution channels than its larger rivals
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 12.7 percentage points
Amphastar Pharmaceuticals is trading at $23.62 per share, or 7.5x forward P/E. Check out our free in-depth research report to learn more about why AMPH doesn’t pass our bar.
Washington Trust Bancorp (WASH)
Market Cap: $749.8 million
Founded in 1800 and operating as Rhode Island's oldest community bank, Washington Trust Bancorp (NASDAQ: WASH) is a regional bank holding company offering commercial banking, mortgage lending, personal banking, and wealth management services.
Why Are We Out on WASH?
- Net interest income trends were unexciting over the last five years as its 4.2% annual growth was below the typical banking firm
- Weak unit economics are reflected in its net interest margin of 2.4%, one of the worst among bank companies
- Earnings per share fell by 7.7% annually over the last five years while its revenue was flat, showing each sale was less profitable
At $39.32 per share, Washington Trust Bancorp trades at 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than WASH.
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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.
