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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two that may face some trouble.
Two Stocks to Sell:
Sabre (SABR)
Market Cap: $664.1 million
Originally a division of American Airlines, Sabre (NASDAQ: SABR) is a technology provider for the global travel and tourism industry.
Why Do We Avoid SABR?
- Sluggish trends in its total bookings suggest customers aren’t adopting its solutions as quickly as the company hoped
- Cash burn makes us question whether it can achieve sustainable long-term growth
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital on unfavorable terms if market conditions deteriorate
At $2.02 per share, Sabre trades at 7.1x forward EV-to-EBITDA. To fully understand why you should be careful with SABR, check out our full research report (it’s free).
Inspire Medical Systems (INSP)
Market Cap: $1.22 billion
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
Why Are We Wary of INSP?
- Smaller revenue base of $915.2 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Projected sales decline of 8% for the next 12 months points to a tough demand environment ahead
Inspire Medical Systems’s stock price of $49.97 implies a valuation ratio of 49.1x forward P/E. Read our free research report to see why you should think twice about including INSP in your portfolio.
One Stock to Buy:
OSI Systems (OSIS)
Market Cap: $3.81 billion
With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ: OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.
Why Is OSIS a Top Pick?
- Market share has increased this cycle as its 10.9% annual revenue growth over the last two years was exceptional
- Share buybacks catapulted its annual earnings per share growth to 14.5%, which outperformed its revenue gains over the last five years
- Rising returns on capital show management is finding more attractive investment opportunities
OSI Systems is trading at $218.81 per share, or 20x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
