Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
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 be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
WD-40 (WDFC)
Market Cap: $2.67 billion
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ: WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Why Does WDFC Fall Short?
- Annual revenue growth of 6.1% over the last three years was below our standards for the consumer staples sector
- Modest revenue base of $620 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its three-year trend
At $193.63 per share, WD-40 trades at 32.5x forward P/E. If you’re considering WDFC for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Chart (GTLS)
Market Cap: $8.97 billion
Installing the first bulk Co2 tank for McDonalds’s sodas, Chart (NYSE: GTLS) provides equipment to store and transport gasses.
Why Is GTLS a Top Pick?
- Backlog has averaged 25.6% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Share buybacks catapulted its annual earnings per share growth to 34.6%, which outperformed its revenue gains over the last two years
- Free cash flow margin jumped by 11.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Chart’s stock price of $199.49 implies a valuation ratio of 15x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
Preferred Bank (PFBC)
Market Cap: $1.12 billion
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ: PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Why Could PFBC Be a Winner?
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 16.6% exceeded its revenue gains over the last five years
- Balance sheet strength has increased this cycle as its 13.2% annual tangible book value per share growth over the last five years was exceptional
- Industry-leading 19.3% return on equity demonstrates management’s skill in finding high-return investments
Preferred Bank is trading at $90.92 per share, or 1.4x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "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 5 Growth Stocks for this month. 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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