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 are two Russell 2000 stocks that could be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
Shake Shack (SHAK)
Market Cap: $3.66 billion
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE: SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Why Does SHAK Fall Short?
- Subpar operating margin of 2.4% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- ROIC of 0.1% reflects management’s challenges in identifying attractive investment opportunities
Shake Shack is trading at $91.05 per share, or 64.3x forward P/E. To fully understand why you should be careful with SHAK, check out our full research report (it’s free).
Two Stocks to Buy:
Mueller Water Products (MWA)
Market Cap: $4.36 billion
As one of the oldest companies in the water infrastructure industry, Mueller (NYSE: MWA) is a provider of water infrastructure products and flow control systems for various sectors.
Why Do We Love MWA?
- Operating margin improvement of 7.1 percentage points over the last five years demonstrates its ability to scale efficiently
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 45.2% over the last two years outstripped its revenue performance
- Free cash flow margin jumped by 4.7 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Mueller Water Products’s stock price of $27.50 implies a valuation ratio of 18.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Nicolet Bankshares (NIC)
Market Cap: $3.04 billion
Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE: NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.
Why Should You Buy NIC?
- Impressive 21.9% annual net interest income growth over the last five years indicates it’s winning market share this cycle
- Exciting net interest income outlook for the upcoming 12 months calls for 42.2% growth, an acceleration from its five-year trend
- Net interest margin expanded by 65 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
At $142.30 per share, Nicolet Bankshares trades at 1.7x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
