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. Keeping that in mind, here are two Russell 2000 stocks that could be the next big thing and one best left off your watchlist.
One Stock to Sell:
Peoples Bancorp (PEBO)
Market Cap: $1.44 billion
Founded in 1902 in Ohio and expanding through both organic growth and acquisitions, Peoples Bancorp (NASDAQ: PEBO) is a financial holding company that provides banking, insurance, equipment leasing, and investment services to consumers and businesses.
Why Do We Avoid PEBO?
- Muted 2.4% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Performance over the past five years shows its incremental sales were less profitable, as its 1.1% annual earnings per share growth trailed its revenue gains
- Estimated tangible book value per share growth of 5.5% for the next 12 months implies profitability will slow from its two-year trend
Peoples Bancorp’s stock price of $40.92 implies a valuation ratio of 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than PEBO.
Two Stocks to Buy:
Alignment Healthcare (ALHC)
Market Cap: $2.98 billion
Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.
Why Do We Love ALHC?
- Annual revenue growth of 43.2% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 47.9% annually, topping its revenue gains
- Free cash flow margin jumped by 6.8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $14.19 per share, Alignment Healthcare trades at 21.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Sezzle (SEZL)
Market Cap: $3.97 billion
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Should You Buy SEZL?
- Market share has increased this cycle as its 66.1% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 22.7% annually over the last two years, massively outpacing its peers
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
Sezzle is trading at $118.65 per share, or 29.9x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
