The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are two Russell 2000 stocks that could be the next big thing and one best left off your watchlist.
One Stock to Sell:
First Interstate BancSystem (FIBK)
Market Cap: $3.55 billion
Tracing its roots back to 1971 and still guided by founding family principles, First Interstate BancSystem (NASDAQ: FIBK) operates a network of community banks across 14 western and midwestern states, offering comprehensive banking services to individuals, businesses, and government entities.
Why Are We Out on FIBK?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Projected tangible book value per share is flat for the next 12 months, implying profitability will slow from its two-year trend
First Interstate BancSystem is trading at $37.88 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including FIBK in your portfolio.
Two Stocks to Watch:
Upwork (UPWK)
Market Cap: $1.04 billion
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ: UPWK) is an online platform where businesses and independent professionals connect to get work done.
Why Does UPWK Stand Out?
- Monetization efforts are paying off as its average revenue per customer has grown by 10.1% annually over the last two years
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 239% outpaced its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
Upwork’s stock price of $8.23 implies a valuation ratio of 3.4x forward EV/EBITDA. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
VSE Corporation (VSEC)
Market Cap: $5.42 billion
With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ: VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.
Why Do We Watch VSEC?
- Annual revenue growth of 13.7% over the past two years was outstanding, reflecting market share gains this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 66.4%
- Operating margin expanded by 5.1 percentage points over the last five years as it scaled and became more efficient
At $217.71 per share, VSE Corporation trades at 48x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 meet near-term momentum — both boxes checked at the same time.
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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
