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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Phibro Animal Health (PAHC)
Market Cap: $1.36 billion
With a portfolio of approximately 800 product lines serving farmers and veterinarians in 90 countries, Phibro Animal Health (NASDAQ: PAHC) develops, manufactures, and markets health products for livestock and companion animals, including antibacterials, vaccines, nutritional supplements, and mineral additives.
Why Are We Wary of PAHC?
- Modest revenue base of $1.5 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend
- Low free cash flow margin of 0.8% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Phibro Animal Health is trading at $33.46 per share, or 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than PAHC.
Golar LNG (GLNG)
Market Cap: $5.33 billion
Pioneering a way to monetize stranded gas reserves that would otherwise be uneconomical to develop, Golar LNG (NASDAQ: GLNG) converts ships into floating liquefied natural gas facilities that liquefy natural gas at offshore sites.
Why Does GLNG Give Us Pause?
- Sales tumbled by 2.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $52.93 per share, Golar LNG trades at 83.5x forward P/E. To fully understand why you should be careful with GLNG, check out our full research report (it’s free).
One Stock to Watch:
Flywire (FLYW)
Market Cap: $1.99 billion
Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ: FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex payments.
Why Do We Like FLYW?
- Billings growth has averaged 36.5% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Operating margin of 5% highlights its superior profitability versus many of its software peers, and its operating leverage amplified its profits over the last year
- Free cash flow margin of 23% is higher than many in the industry, giving it breathing room and optionality
Flywire’s stock price of $16.31 implies a valuation ratio of 2.6x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
