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 a breakout winner and two that may face some trouble.
Two Stocks to Sell:
PacBio (PACB)
Market Cap: $434.8 million
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ: PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Does PACB Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.6% annually over the last two years
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
PacBio’s stock price of $1.39 implies a valuation ratio of 2.4x forward price-to-sales. Read our free research report to see why you should think twice about including PACB in your portfolio.
ManpowerGroup (MAN)
Market Cap: $2.60 billion
Founded during the post-World War II economic boom when businesses needed temporary workers, ManpowerGroup (NYSE: MAN) connects millions of people to employment opportunities through its global network of staffing, recruitment, and workforce management services.
Why Do We Think MAN Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.2% annually over the last five years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.8% annually, worse than its revenue
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
ManpowerGroup is trading at $55.88 per share, or 13.5x forward P/E. Check out our free in-depth research report to learn more about why MAN doesn’t pass our bar.
One Stock to Watch:
Magnite (MGNI)
Market Cap: $2.83 billion
Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ: MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.
Why Do We Like MGNI?
- Annual revenue growth of 24% over the last five years was superb and indicates its market share increased during this cycle
- Earnings per share grew by 25.8% annually over the last two years and trumped its peers
- Improving returns on capital suggest its past investments are beginning to deliver value
At $19.52 per share, Magnite trades at 17.2x 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
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
