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.
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 are two Russell 2000 stocks that could be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
Rapid7 (RPD)
Market Cap: $470.5 million
With its name inspired by the need for quick responses to cyber threats, Rapid7 (NASDAQ: RPD) provides cybersecurity software and services that help organizations detect vulnerabilities, monitor threats, and respond to security incidents.
Why Do We Steer Clear of RPD?
- Customers had second thoughts about committing to its platform over the last year as its billings plateaued
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Efficiency has decreased over the last year as its operating margin fell by 1.7 percentage points
At $7.17 per share, Rapid7 trades at 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including RPD in your portfolio.
Two Stocks to Watch:
Douglas Dynamics (PLOW)
Market Cap: $1.05 billion
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Do We Like PLOW?
- Projected revenue growth of 13.1% for the next 12 months indicates demand will rise above its two-year trend
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 41.4% annually, topping its revenue gains
- Free cash flow margin increased by 9.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Douglas Dynamics’s stock price of $45.34 implies a valuation ratio of 16.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
IonQ (IONQ)
Market Cap: $24.41 billion
Founded by quantum physics pioneers from the University of Maryland and Duke University in 2015, IonQ (NYSE: IONQ) develops quantum computers that process information using trapped ions to solve complex computational problems beyond the capabilities of traditional computers.
Why Are We Fans of IONQ?
- Impressive 172% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Market share will likely rise over the next 12 months as its expected revenue growth of 53.2% is robust
- Adjusted operating margin expanded by 707.5 percentage points over the last five years as it scaled and became more efficient
IonQ is trading at $64.11 per share, or 82.4x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
