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 are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Five9 (FIVN)
Market Cap: $1.47 billion
Taking its name from the "five nines" (99.999%) standard for optimal service reliability in telecommunications, Five9 (NASDAQ: FIVN) provides cloud-based software that enables businesses to run their contact centers with tools for customer service, sales, and marketing across multiple communication channels.
Why Does FIVN Give Us Pause?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 10.5% underwhelmed
- Estimated sales growth of 8.1% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 55.4% reflects its high servicing costs
Five9’s stock price of $18.91 implies a valuation ratio of 1.4x forward price-to-sales. If you’re considering FIVN for your portfolio, see our FREE research report to learn more.
Concrete Pumping (BBCP)
Market Cap: $356.2 million
Going public via SPAC in 2018, Concrete Pumping (NASDAQ: BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.
Why Do We Steer Clear of BBCP?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share have dipped by 37.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin shrank by 7.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $6.93 per share, Concrete Pumping trades at 51.6x forward P/E. Dive into our free research report to see why there are better opportunities than BBCP.
TowneBank (TOWN)
Market Cap: $2.59 billion
Founded in 1998 with a commitment to community-centered banking in the Hampton Roads region, TowneBank (NASDAQ: TOWN) is a community-focused financial institution providing banking, lending, and wealth management services to individuals and businesses in Virginia and North Carolina.
Why Are We Wary of TOWN?
- Muted 5.1% annual revenue growth over the last five years shows its demand lagged behind its banking peers
- Annual net interest income growth of 7.2% over the last five years was below our standards for the banking sector
- Estimated tangible book value per share growth of 2.3% for the next 12 months implies profitability will slow from its two-year trend
TowneBank is trading at $33.22 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why TOWN doesn’t pass our bar.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
