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. Keeping that in mind, here is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
Advance Auto Parts (AAP)
Market Cap: $3.11 billion
Founded in Virginia in 1932, Advance Auto Parts (NYSE: AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.
Why Do We Steer Clear of AAP?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Performance over the past three years was negatively impacted by new share issuances as its earnings per share dropped by 44.3% annually, worse than its revenue
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Advance Auto Parts’s stock price of $51.68 implies a valuation ratio of 19.2x forward P/E. Read our free research report to see why you should think twice about including AAP in your portfolio.
MasterCraft (MCFT)
Market Cap: $319.7 million
Started by a waterskiing instructor, MasterCraft (NASDAQ: MCFT) specializes in designing, manufacturing, and selling sport boats.
Why Do We Pass on MCFT?
- Number of boats sold has disappointed over the past two years, indicating weak demand for its offerings
- Free cash flow margin is forecasted to shrink by 2.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
MasterCraft is trading at $19.63 per share, or 12.6x forward P/E. To fully understand why you should be careful with MCFT, check out our full research report (it’s free).
One Stock to Watch:
Gevo (GEVO)
Market Cap: $563 million
Operating one of the largest dairy-based renewable natural gas facilities in the United States, Gevo (NASDAQ: GEVO) produces sustainable aviation fuel and other renewable hydrocarbon fuels from plant-based feedstocks like corn.
Why Could GEVO Be a Winner?
- Annual revenue growth of 18.2% over the last ten years was superb and indicates its market share increased during this cycle
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
At $2.35 per share, Gevo trades at 17.1x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
