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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.
Two Stocks to Sell:
KB Home (KBH)
Market Cap: $4.13 billion
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Should You Sell KBH?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 29.3% declines over the past two years
- Earnings per share have dipped by 4.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
At $65.40 per share, KB Home trades at 15.4x forward P/E. Dive into our free research report to see why there are better opportunities than KBH.
QuidelOrtho (QDEL)
Market Cap: $1.53 billion
Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ: QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.
Why Do We Avoid QDEL?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 21.9 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
QuidelOrtho is trading at $22.50 per share, or 10.9x forward P/E. If you’re considering QDEL for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Granite Construction (GVA)
Market Cap: $5.91 billion
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
Why Are We Fans of GVA?
- Annual revenue growth of 12.3% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 38.9% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin jumped by 9.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Granite Construction’s stock price of $135.82 implies a valuation ratio of 21.8x 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
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
