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 is one Russell 2000 stock that could be the next big thing and two best left off your watchlist.
Two Stocks to Sell:
Stitch Fix (SFIX)
Market Cap: $462.8 million
One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Should You Sell SFIX?
- Demand for its offerings was relatively low as its number of active clients has underwhelmed
- Persistent operating margin losses suggest the business manages its expenses poorly
- Poor free cash flow margin of 1.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Stitch Fix’s stock price of $3.48 implies a valuation ratio of 0.3x forward price-to-sales. Check out our free in-depth research report to learn more about why SFIX doesn’t pass our bar.
PubMatic (PUBM)
Market Cap: $389.2 million
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ: PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Do We Avoid PUBM?
- Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 96% net revenue retention rate
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 7.4 percentage points
At $8.21 per share, PubMatic trades at 1.4x forward price-to-sales. Read our free research report to see why you should think twice about including PUBM in your portfolio.
One Stock to Buy:
Zeta Global (ZETA)
Market Cap: $3.84 billion
Powered by an AI engine that processes over one trillion consumer signals monthly, Zeta Global (NYSE: ZETA) operates a data-driven cloud platform that helps companies target, connect, and engage with consumers through personalized marketing across channels like email, social media, and video.
Why Will ZETA Outperform?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 31.5% over the last year
- Market share will likely rise over the next 12 months as its expected revenue growth of 34.7% is robust
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Zeta Global is trading at $15.76 per share, or 2.1x forward price-to-sales. Is now the time to initiate a position? 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.
