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 is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
nLIGHT (LASR)
Market Cap: $1.95 billion
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Do We Think LASR Will Underperform?
- Sales trends were unexciting over the last five years as its 2.6% annual growth was below the typical industrials company
- Cash burn has widened over the last five years, making us question whether it can reliably generate shareholder value
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $38.65 per share, nLIGHT trades at 137.4x forward P/E. Check out our free in-depth research report to learn more about why LASR doesn’t pass our bar.
Redwire (RDW)
Market Cap: $1.49 billion
Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.
Why Should You Sell RDW?
- Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
- Free cash flow margin shrank by 14.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Redwire is trading at $9.02 per share, or 66x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than RDW.
One Stock to Buy:
Alignment Healthcare (ALHC)
Market Cap: $4.05 billion
Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.
Why Should You Buy ALHC?
- Business is winning new contracts that can potentially increase in value as its customer base averaged 41.2% growth over the past two years
- Earnings per share grew by 30.1% annually over the last four years, massively outpacing its peers
- Free cash flow turned positive over the last five years, indicating the company has achieved financial self-sustainability
Alignment Healthcare’s stock price of $20.26 implies a valuation ratio of 56.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
