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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Nature's Sunshine (NATR)
Market Cap: $358.7 million
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Why Do We Think Twice About NATR?
- Lackluster 5.3% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Smaller revenue base of $489.8 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
At $20.80 per share, Nature's Sunshine trades at 17.3x forward P/E. Check out our free in-depth research report to learn more about why NATR doesn’t pass our bar.
Matthews (MATW)
Market Cap: $806.6 million
Originally a death care company, Matthews International (NASDAQ: MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.
Why Should You Sell MATW?
- Sales tumbled by 5% annually over the last five years, showing consumer trends are working against it
- Cash-burning history makes us doubt the long-term viability of its business model
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Matthews is trading at $26.99 per share, or 0.7x trailing 12-month price-to-sales. To fully understand why you should be careful with MATW, check out our full research report (it’s free).
Banner Bank (BANR)
Market Cap: $2.27 billion
Founded in 1890 in Walla Walla, Washington, and evolving through more than a century of economic cycles, Banner Corporation (NASDAQ: BANR) operates Banner Bank, providing commercial banking services, loans, and financial products to individuals and businesses across Washington, Oregon, California, Idaho, and Utah.
Why Are We Wary of BANR?
- Sales trends were unexciting over the last five years as its 3.1% annual growth was below the typical banking company
- Net interest income trends were unexciting over the last five years as its 4.5% annual growth was below the typical banking firm
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 6.4% annually
Banner Bank’s stock price of $66.86 implies a valuation ratio of 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than BANR.
Stocks We Like More
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