The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
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 a breakout winner and two that may face some trouble.
Two Stocks to Sell:
Pangaea (PANL)
Market Cap: $524.4 million
Established in 1996, Pangaea Logistics (NASDAQ: PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.
Why Are We Cautious About PANL?
- High input costs result in an inferior gross margin of 19.8% that must be offset through higher volumes
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 4.9 percentage points
- Earnings per share have dipped by 23.4% annually over the past four years, which is concerning because stock prices follow EPS over the long term
Pangaea is trading at $8.02 per share, or 9.1x forward P/E. Dive into our free research report to see why there are better opportunities than PANL.
Cogent (CCOI)
Market Cap: $368.6 million
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Are We Out on CCOI?
- Sales tumbled by 5.6% annually over the last two years, showing market trends are working against it during this cycle
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $7.68 per share, Cogent trades at 7.6x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CCOI doesn’t pass our bar.
One Stock to Buy:
Gorman-Rupp (GRC)
Market Cap: $1.96 billion
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Why Is GRC a Good Business?
- Annual revenue growth of 14.7% over the past five years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 28% annually, topping its revenue gains
- Free cash flow margin jumped by 12.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Gorman-Rupp’s stock price of $74.23 implies a valuation ratio of 25.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
