The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
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 that may face some trouble.
Two Stocks to Sell:
STAAR Surgical (STAA)
Market Cap: $1.11 billion
With over 2.5 million implants performed worldwide, STAAR Surgical (NASDAQ: STAA) designs and manufactures implantable lenses that correct vision problems without removing the eye's natural lens.
Why Do We Pass on STAA?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Subscale operations are evident in its revenue base of $339.6 million, meaning it has fewer distribution channels than its larger rivals
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
STAAR Surgical’s stock price of $22.19 implies a valuation ratio of 26x forward P/E. Dive into our free research report to see why there are better opportunities than STAA.
Eastern Bank (EBC)
Market Cap: $4.88 billion
Founded in 1818 as one of America's oldest mutual banks before converting to a public company in 2020, Eastern Bankshares (NASDAQ: EBC) operates as a bank holding company providing commercial and retail banking services primarily in Massachusetts, New Hampshire, and Rhode Island.
Why Are We Hesitant About EBC?
- Weak unit economics are reflected in its net interest margin of 3.5%, one of the worst among bank companies
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 4.9% annually over the last five years
- Underwhelming 3.1% return on equity reflects management’s difficulties in finding profitable growth opportunities
Eastern Bank is trading at $22.30 per share, or 1.2x forward P/B. Check out our free in-depth research report to learn more about why EBC doesn’t pass our bar.
One Stock to Watch:
AZZ (AZZ)
Market Cap: $4.16 billion
Responsible for projects like nuclear facilities, AZZ (NYSE: AZZ) is a provider of metal coating and power infrastructure solutions.
Why Does AZZ Stand Out?
- Impressive 17.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Highly efficient business model is illustrated by its impressive 15.5% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
- Earnings per share have massively outperformed its peers over the last five years, increasing by 17.5% annually
At $138.41 per share, AZZ trades at 19.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
