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.
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.
Under Armour (UAA)
Market Cap: $2.88 billion
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Are We Bearish on UAA?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Under Armour is trading at $6.85 per share, or 62.8x forward P/E. Check out our free in-depth research report to learn more about why UAA doesn’t pass our bar.
AdaptHealth (AHCO)
Market Cap: $1.42 billion
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ: AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Does AHCO Fall Short?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Issuance of new shares over the last five years caused its earnings per share to fall by 12.4% annually while its revenue grew
- Underwhelming 0.3% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
AdaptHealth’s stock price of $10.67 implies a valuation ratio of 10.7x forward P/E. If you’re considering AHCO for your portfolio, see our FREE research report to learn more.
Garrett Motion (GTX)
Market Cap: $5.78 billion
A key player in the transition to cleaner vehicles, Garrett Motion (NYSE: GTX) designs and manufactures turbochargers, air compressors, and electric motor technologies for vehicle manufacturers and industrial applications.
Why Does GTX Worry Us?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Estimated sales growth of 4.6% for the next 12 months is soft and implies weaker demand
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 19.9%
At $30.32 per share, Garrett Motion trades at 9.6x forward EV-to-EBITDA. To fully understand why you should be careful with GTX, check out our full research report (it’s free).
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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 Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
