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.
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. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two that may face some trouble.
Two Stocks to Sell:
Arhaus (ARHS)
Market Cap: $1.15 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Is ARHS Not Exciting?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Modest revenue base of $1.41 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 24.2% annually
Arhaus is trading at $8.12 per share, or 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than ARHS.
Trinity (TRN)
Market Cap: $2.27 billion
Operating under the trade name TrinityRail, Trinity (NYSE:TRN) is a provider of railcar products and services in North America.
Why Are We Cautious About TRN?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 24.9% declines over the past two years
- Sales are projected to be flat over the next 12 months and imply weak demand
- Cash-burning history makes us doubt the long-term viability of its business model
Trinity’s stock price of $28.48 implies a valuation ratio of 16.1x forward P/E. To fully understand why you should be careful with TRN, check out our full research report (it’s free).
One Stock to Watch:
WD-40 (WDFC)
Market Cap: $2.61 billion
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ:WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Why Is WDFC Interesting?
- Differentiated product offerings are difficult to replicate at scale and result in a stellar gross margin of 55.4%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are growing as it capitalizes on even better market opportunities
At $199.78 per share, WD-40 trades at 33.4x 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
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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.