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.
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. Keeping that in mind, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
fuboTV (FUBO)
Market Cap: $1.23 billion
Originally launched as a soccer streaming platform, fuboTV (NYSE: FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
Why Do We Pass on FUBO?
- Performance surrounding its domestic subscribers has lagged its peers
- Poor expense management has led to operating margin losses
- Free cash flow margin is forecasted to shrink by 6.5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $3.60 per share, fuboTV trades at 77.5x forward P/E. Dive into our free research report to see why there are better opportunities than FUBO.
Hillman (HLMN)
Market Cap: $1.91 billion
Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ: HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.
Why Are We Hesitant About HLMN?
- 1.6% annual revenue growth over the last two years was slower than its industrials peers
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Low returns on capital reflect management’s struggle to allocate funds effectively
Hillman’s stock price of $9.76 implies a valuation ratio of 17.6x forward P/E. Check out our free in-depth research report to learn more about why HLMN doesn’t pass our bar.
Park-Ohio (PKOH)
Market Cap: $253.6 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Are We Cautious About PKOH?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Gross margin of 15.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Negative free cash flow raises questions about the return timeline for its investments
Park-Ohio is trading at $18.62 per share, or 5.5x forward P/E. To fully understand why you should be careful with PKOH, check out our full research report (it’s free).
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