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. That said, here is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
Kimball Solutions (KE)
Market Cap: $655 million
Founded in 1961, Kimball Solutions (NASDAQ: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Why Do We Steer Clear of KE?
- Annual sales declines of 8.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 13.4% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- 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
At $27.35 per share, Kimball Solutions trades at 17.3x forward P/E. Read our free research report to see why you should think twice about including KE in your portfolio.
Walker & Dunlop (WD)
Market Cap: $1.21 billion
Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE: WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.
Why Should You Sell WD?
- Annual net interest income declines of 41.6% for the past five years show its loan book struggled during this cycle
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 13.7% annually
- Tangible book value per share tumbled by 8.5% annually over the last five years, showing banking sector trends are working against it during this cycle
Walker & Dunlop’s stock price of $35.20 implies a valuation ratio of 0.7x forward P/B. Dive into our free research report to see why there are better opportunities than WD.
One Stock to Buy:
Magnite (MGNI)
Market Cap: $3.62 billion
Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ: MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.
Why Is MGNI a Top Pick?
- Market share has increased this cycle as its 18.4% annual revenue growth over the last five years was exceptional
- Robust free cash flow margin of 23.7% gives it many options for capital deployment
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Magnite is trading at $25.48 per share, or 21.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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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 Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
