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 are two Russell 2000 stocks that could deliver strong gains and one that may struggle to keep up.
One stock to sell:
Myriad Genetics (MYGN)
Market cap: $634.2 million
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Are We Out on MYGN?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Issuance of new shares over the last five years caused its earnings per share to fall by 7.4% annually while its revenue grew
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
Myriad Genetics’s stock price of $6.62 implies a valuation ratio of 0.8x forward price-to-sales. Check out our free in-depth research report to learn more about why MYGN doesn’t pass our bar.
Two stocks to watch:
Agilysys (AGYS)
Market cap: $3.24 billion
With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.
Why Does AGYS Stand Out?
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Highly efficient business model is illustrated by its impressive 14.3% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $114.21 per share, Agilysys trades at 8.1x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Redwire (RDW)
Market cap: $2.24 billion
Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.
Why Are We Fans of RDW?
- Market share has increased this cycle as its 20.8% annual revenue growth over the last two years was exceptional
- Notable projected revenue growth of 21.9% for the next 12 months hints at market share gains
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Redwire is trading at $8.88 per share, or 3.8x 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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