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. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two best left off your watchlist.
Two Stocks to Sell:
Shutterstock (SSTK)
Market Cap: $605.4 million
Originally featuring a library that included many of founder Jon Oringer’s photos, Shutterstock (NYSE: SSTK) is now a digital platform where customers can license and use hundreds of millions of pieces of content.
Why Do We Pass on SSTK?
- Preference for prioritizing user growth over monetization has led to 73.7% annual drops in its average revenue per request
- Sales are projected to tank by 10% over the next 12 months as demand evaporates
- Flat earnings per share over the last three years lagged its peers
Shutterstock is trading at $17.04 per share, or 2.9x forward EV/EBITDA. If you’re considering SSTK for your portfolio, see our FREE research report to learn more.
First Interstate BancSystem (FIBK)
Market Cap: $3.26 billion
Tracing its roots back to 1971 and still guided by founding family principles, First Interstate BancSystem (NASDAQ: FIBK) operates a network of community banks across 14 western and midwestern states, offering comprehensive banking services to individuals, businesses, and government entities.
Why Do We Steer Clear of FIBK?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.5% annually over the last two years
- Anticipated 5.2 percentage point rise in its efficiency ratio suggests its expenses will increase as a percentage of revenue
- Capital strength will likely plateau over the next 12 months as Wall Street expects flat tangible book value per share
At $32.22 per share, First Interstate BancSystem trades at 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than FIBK.
One Stock to Buy:
Watts Water Technologies (WTS)
Market Cap: $9.78 billion
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Is WTS a Good Business?
- Solid 10.1% annual revenue growth over the last five years indicates its offering’s solve complex business issues
- Share buybacks catapulted its annual earnings per share growth to 22.2%, which outperformed its revenue gains over the last five years
- Free cash flow margin increased by 6.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Watts Water Technologies’s stock price of $293.51 implies a valuation ratio of 25.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
