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.
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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.
Two stocks to sell:
Camping World (CWH)
Market Cap: $277.7 million
Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE: CWH) still sells RVs along with boats and general merchandise for outdoor activities.
Why Are We Out on CWH?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Issuance of new shares over the last three years caused its earnings per share to fall by 67.5% annually, even worse than its revenue declines
- 8× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $4.38 per share, Camping World trades at 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than CWH.
Cracker Barrel (CBRL)
Market Cap: $1.47 billion
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ: CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Why Is CBRL Risky?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Falling earnings per share over the last seven years has some investors worried as stock prices ultimately follow EPS over the long term
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Cracker Barrel is trading at $65.77 per share, or 33.4x forward P/E. Check out our free in-depth research report to learn more about why CBRL doesn’t pass our bar.
One stock to watch:
Helmerich & Payne (HP)
Market Cap: $3.82 billion
Operating the largest fleet of super-spec rigs in North America with technology that can drill horizontal wells over two miles long, Helmerich & Payne (NYSE: HP) provides drilling rigs and crews to oil and gas companies that need wells drilled to extract hydrocarbons from underground.
Why Is HP on Our Radar?
- Impressive 30.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- $4.00 billion in revenue gives it scale, which leads to bargaining power with suppliers and retailers
- EBITDA margin expanded by 6.3 percentage points over the last five years as it scaled and became more efficient
Helmerich & Payne’s stock price of $38.24 implies a valuation ratio of 28.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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