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 deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Coursera (COUR)
Market Cap: $1.02 billion
Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Why Do We Think Twice About COUR?
- Estimated sales growth of 6.3% for the next 12 months implies demand will slow from its three-year trend
- Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 54.5%
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
Coursera’s stock price of $6.02 implies a valuation ratio of 2.7x forward EV/EBITDA. Check out our free in-depth research report to learn more about why COUR doesn’t pass our bar.
Genesco (GCO)
Market Cap: $376.1 million
Spanning a broad range of styles, brands, and prices, Genesco (NYSE: GCO) sells footwear, apparel, and accessories through multiple brands and banners.
Why Do We Avoid GCO?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $34.62 per share, Genesco trades at 16.4x forward P/E. Dive into our free research report to see why there are better opportunities than GCO.
One Stock to Buy:
IMAX (IMAX)
Market Cap: $1.96 billion
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE: IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Are We Backing IMAX?
- Annual revenue growth of 23.5% over the past five years was outstanding, reflecting market share gains this cycle
- Free cash flow margin grew by 23.5 percentage points over the last five years, giving the company more chips to play with
- Improving returns on capital suggest its past investments are beginning to deliver value
IMAX is trading at $35.69 per share, or 20.5x forward P/E. Is now the time to initiate a position? 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
