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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
Harley-Davidson (HOG)
Market Cap: $2.71 billion
Founded in 1903, Harley-Davidson (NYSE: HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.
Why Is HOG Risky?
- Number of motorcycles sold has disappointed over the past two years, indicating weak demand for its offerings
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 10.6% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $24.86 per share, Harley-Davidson trades at 28.7x forward P/E. Dive into our free research report to see why there are better opportunities than HOG.
RPC (RES)
Market Cap: $1.54 billion
Operating primarily in the Permian Basin with 10 hydraulic fracturing fleets, RPC (NYSE: RES) provides specialized services and equipment like hydraulic fracturing, coiled tubing, and cementing to help oil and gas companies complete and maintain wells.
Why Are We Wary of RES?
- Revenue base of $1.75 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Gross margin of 28.1% is below its competitors, leaving less money to invest in exploration and production
- Low free cash flow margin of 5.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
RPC’s stock price of $5.50 implies a valuation ratio of 25.7x forward P/E. If you’re considering RES for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Maximus (MMS)
Market Cap: $3.26 billion
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Does MMS Stand Out?
- Adjusted operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Share repurchases over the last two years enabled its annual earnings per share growth of 21.2% to outpace its revenue gains
- Rising returns on capital show management is finding more attractive investment opportunities
Maximus is trading at $56 per share, or 6.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
