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 are two Russell 2000 stocks that could be the next big thing and one that may face some trouble.
One Stock to Sell:
Vestis (VSTS)
Market Cap: $863.7 million
Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE: VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.
Why Should You Sell VSTS?
- Sales tumbled by 2% annually over the last two years, showing market trends are working against its favor during this cycle
- Free cash flow margin dropped by 6.1 percentage points over the last four years, implying the company became more capital intensive as competition picked up
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $6.61 per share, Vestis trades at 18.9x forward P/E. To fully understand why you should be careful with VSTS, check out our full research report (it’s free for active Edge members).
Two Stocks to Buy:
Planet Labs (PL)
Market Cap: $6.07 billion
Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE: PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.
Why Is PL a Good Business?
- Market share has increased this cycle as its 23.1% annual revenue growth over the last five years was exceptional
- Free cash flow margin is now positive, showing the company has crossed a key inflection point
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Planet Labs is trading at $19.24 per share, or 815.3x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Moelis (MC)
Market Cap: $5.30 billion
Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE: MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.
Why Will MC Outperform?
- Market share has increased this cycle as its 32.5% annual revenue growth over the last two years was exceptional
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 299% outpaced its revenue gains
- ROE punches in at 44.9%, illustrating management’s expertise in identifying profitable investments
Moelis’s stock price of $71.60 implies a valuation ratio of 23.6x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
