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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
G-III (GIII)
Market Cap: $1.54 billion
Founded as a small leather goods business, G-III (NASDAQ: GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.
Why Are We Out on GIII?
- Muted 6% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Annual earnings per share growth of 3.5% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Low free cash flow margin of 8.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $36.40 per share, G-III trades at 15x forward P/E. Read our free research report to see why you should think twice about including GIII in your portfolio.
Banc of California (BANC)
Market Cap: $3.05 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Do We Think BANC Will Underperform?
- Annual net interest income growth of 2.5% over the last five years was below our standards for the banking sector
- Costs have risen faster than its revenue over the last five years, causing its efficiency ratio to worsen by 15.1 percentage points
- Sales over the last five years were less profitable as its earnings per share fell by 24.3% annually while its revenue was flat
Banc of California’s stock price of $19.23 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than BANC.
One Stock to Buy:
Pathward Financial (CASH)
Market Cap: $1.91 billion
Formerly known as Meta Financial until its 2022 rebranding, Pathward Financial (NASDAQ: CASH) provides banking-as-a-service solutions and commercial finance products, enabling partners to offer financial services like prepaid cards, payment processing, and lending options.
Why Do We Love CASH?
- 12.2% annual net interest income growth over the last five years surpassed the sector average as its loans resonated with borrowers
- Strong performance of its loan book results in a best-in-class net interest margin of 7.1%
- Impressive 21.5% annual tangible book value per share growth over the last two years indicates it’s building equity value this cycle
Pathward Financial is trading at $90.71 per share, or 2.1x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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.
