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. That said, here are three Russell 2000 stocks to avoid and better alternatives to consider.
10x Genomics (TXG)
Market Cap: $5.81 billion
Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ: TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.
Why Are We Out on TXG?
- Sales trends were unexciting over the last two years as its 1.1% annual growth was below the typical healthcare company
- Subscale operations are evident in its revenue base of $638.8 million, meaning it has fewer distribution channels than its larger rivals
- Negative returns on capital show that some of its growth strategies have backfired
At $45.86 per share, 10x Genomics trades at 9.4x forward price-to-sales. Check out our free in-depth research report to learn more about why TXG doesn’t pass our bar.
Employers Holdings (EIG)
Market Cap: $887.5 million
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE: EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Why Should You Dump EIG?
- Sluggish 1.7% annualized growth in net premiums earned over the last two years indicates the firm trailed its insurance peers
- Expenses have increased as a percentage of revenue over the last five years as its pre-tax profit margin fell by 28.5 percentage points
- Earnings per share fell by 29.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Employers Holdings’s stock price of $48.67 implies a valuation ratio of 1x forward P/B. To fully understand why you should be careful with EIG, check out our full research report (it’s free).
S&T Bancorp (STBA)
Market Cap: $1.77 billion
Tracing its roots back to 1902 in western Pennsylvania's industrial heartland, S&T Bancorp (NASDAQ: STBA) is a Pennsylvania-based bank holding company that provides retail and commercial banking services, cash management, trust services, and investment advisory solutions.
Why Are We Hesitant About STBA?
- Muted 4.9% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Anticipated net interest income growth of 4.1% for the next year implies demand will be shaky
- Earnings per share were flat over the last two years and fell short of the peer group average
S&T Bancorp is trading at $49.32 per share, or 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than STBA.
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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.
