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 a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
Cal-Maine (CALM)
Market Cap: $4.12 billion
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Does CALM Worry Us?
- Sales tumbled by 2.5% annually over the last three years, showing consumer trends are working against it
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- 13.7 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
Cal-Maine is trading at $87.78 per share, or 61.4x forward P/E. Check out our free in-depth research report to learn more about why CALM doesn’t pass our bar.
Expro (XPRO)
Market Cap: $1.79 billion
Operating in over 50 countries from deepwater offshore platforms to remote onshore fields, Expro (NYSE: XPRO) provides equipment and services that help oil and gas companies drill wells, measure production, and maintain well integrity.
Why Are We Cautious About XPRO?
- Subscale operations are evident in its revenue base of $1.55 billion, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 20.2% reflects its high production costs and unfavorable asset base
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Expro’s stock price of $15.95 implies a valuation ratio of 13.5x forward P/E. To fully understand why you should be careful with XPRO, check out our full research report (it’s free).
One Stock to Watch:
CarGurus (CARG)
Market Cap: $3.27 billion
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Are We Fans of CARG?
- Platform is difficult to replicate at scale and results in a best-in-class gross margin of 88.4%
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 32.5% annually
- Strong free cash flow margin of 26.5% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $36.24 per share, CarGurus trades at 10.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full 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.
