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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here are two Russell 2000 stocks that could deliver strong gains and one that may struggle to keep up.
One Stock to Sell:
Marriott Vacations (VAC)
Market Cap: $2.31 billion
Spun off from Marriott International in 1984, Marriott Vacations (NYSE: VAC) is a vacation company providing leisure experiences for travelers around the world.
Why Do We Avoid VAC?
- 11.8% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Marriott Vacations is trading at $67.39 per share, or 8.4x forward P/E. Read our free research report to see why you should think twice about including VAC in your portfolio.
Two Stocks to Watch:
Commvault (CVLT)
Market Cap: $3.45 billion
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Why Does CVLT Stand Out?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 26.6% over the last year
- Prominent and differentiated software results in a premier gross margin of 81.4%
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
At $78.42 per share, Commvault trades at 2.7x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Tidewater (TDW)
Market Cap: $4.14 billion
Operating one of the world's largest fleets with over 200 vessels spanning 30 countries, Tidewater (NYSE: TDW) operates offshore service vessels that transport supplies, equipment, and workers to oil rigs and platforms.
Why Are We Fans of TDW?
- Annual revenue growth of 27.8% over the past five years was outstanding, reflecting market share gains this cycle
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Strong free cash flow margin of 14.8% enables it to reinvest or return capital consistently
Tidewater’s stock price of $80.38 implies a valuation ratio of 20.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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