
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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
Sally Beauty (SBH)
Market Cap: $1.54 billion
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Should You Sell SBH?
- Lack of new stores suggest it’s attempting to increase revenue at existing locations because demand is sluggish
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Revenue base of $3.73 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
At $16.53 per share, Sally Beauty trades at 7.4x forward P/E. Check out our free in-depth research report to learn more about why SBH doesn’t pass our bar.
Nelnet (NNI)
Market Cap: $4.46 billion
Starting as a student loan servicer in the 1970s and evolving through the changing landscape of education finance, Nelnet (NYSE: NNI) provides student loan servicing, education technology, payment processing, and banking services while managing a portfolio of education loans.
Why Are We Hesitant About NNI?
- 3.6% annual revenue growth over the last five years was slower than its financials peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 8.3% annually while its revenue grew
Nelnet’s stock price of $124.51 implies a valuation ratio of 15.1x forward P/E. Dive into our free research report to see why there are better opportunities than NNI.
One Stock to Buy:
Sezzle (SEZL)
Market Cap: $3.83 billion
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Will SEZL Outperform?
- Impressive 66.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 22.7% annually
- ROE punches in at 16.4%, illustrating management’s expertise in identifying profitable investments
Sezzle is trading at $113.69 per share, or 18.7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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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 Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
