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.
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.
Teradata (TDC)
Market Cap: $2.88 billion
Pioneering data warehousing technology in the 1980s before "big data" was a common term, Teradata (NYSE: TDC) provides cloud-based data analytics and AI platforms that help large enterprises integrate, analyze, and leverage their data across multiple environments.
Why Are We Bearish on TDC?
- Offerings struggled to generate meaningful interest as its average billings growth of 3.7% over the last year did not impress
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 20.2 percentage points over the next year
At $30.50 per share, Teradata trades at 1.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than TDC.
Optimum Communications (OPTU)
Market Cap: $352.6 million
Based in Long Island City, Optimum Communications (NYSE: OPTU) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Do We Think OPTU Will Underperform?
- Performance surrounding its broadband subscribers has lagged its peers
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Optimum Communications’s stock price of $0.74 implies a valuation ratio of 8.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why OPTU doesn’t pass our bar.
WesBanco (WSBC)
Market Cap: $3.99 billion
Tracing its roots back to 1870 in West Virginia, WesBanco (NASDAQ: WSBC) is a bank holding company that provides retail and commercial banking, trust services, insurance, and investment products through its subsidiaries across several Midwestern and Mid-Atlantic states.
Why Do We Think Twice About WSBC?
- Weak unit economics are reflected in its net interest margin of 3.5%, one of the worst among bank companies
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
- Tangible book value per share stagnated over the last five years, limiting its ability to leverage its balance sheet to make additional investments
WesBanco is trading at $41.58 per share, or 1x forward P/B. If you’re considering WSBC for your portfolio, see our FREE research report to learn more.
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
