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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. Keeping that in mind, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Ruger (RGR)
Market Cap: $663.4 million
Founded in 1949, Ruger (NYSE: RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Do We Avoid RGR?
- Sales tumbled by 3.8% annually over the last five years, showing consumer trends are working against it
- Poor free cash flow margin of 7.7% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Ruger is trading at $41.37 per share, or 21.6x forward P/E. Dive into our free research report to see why there are better opportunities than RGR.
EVgo (EVGO)
Market Cap: $211.2 million
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ: EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Do We Think Twice About EVGO?
- Historical operating margin losses point to an inefficient cost structure
- Cash-burning history makes us doubt the long-term viability of its business model
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
EVgo’s stock price of $1.47 implies a valuation ratio of 0.5x forward price-to-sales. If you’re considering EVGO for your portfolio, see our FREE research report to learn more.
OFG Bancorp (OFG)
Market Cap: $2.21 billion
Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE: OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.
Why Does OFG Give Us Pause?
- Muted 9.2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Demand is forecasted to shrink as its estimated net interest income for the next 12 months is flat
- 33.4 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
At $52.27 per share, OFG Bancorp trades at 1.5x forward P/B. To fully understand why you should be careful with OFG, check out our full research report (it’s free).
Stocks We Like More
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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.
