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 is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
OneWater (ONEW)
Market Cap: $224.6 million
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Is ONEW Not Exciting?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
OneWater is trading at $13.77 per share, or 7.4x forward P/E. Read our free research report to see why you should think twice about including ONEW in your portfolio.
iRhythm (IRTC)
Market Cap: $4.33 billion
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Does IRTC Fall Short?
- Issuance of new shares over the last five years caused its earnings per share to fall by 5.6% annually while its revenue grew
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- High net-debt-to-EBITDA ratio of 124× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $137.50 per share, iRhythm trades at 75.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than IRTC.
One Stock to Buy:
Aris Water (ARIS)
Market Cap: $694.9 million
Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.
Why Is ARIS a Top Pick?
- Annual revenue growth of 15.1% over the past two years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 35% annually, topping its revenue gains
- Free cash flow turned positive over the last five years, indicating the company has achieved financial self-sustainability
Aris Water’s stock price of $21.29 implies a valuation ratio of 14.4x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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