3 Russell 2000 Stocks We Keep Off Our Radar
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 to avoid and better alternatives to consider.
Bloomin' Brands (BLMN)
Market Cap: $722.6 million
Owner of the iconic Australian-themed Outback Steakhouse, Bloomin’ Brands (NASDAQ:BLMN) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Should You Sell BLMN?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Sales are projected to be flat over the next 12 months and imply weak demand
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $8.45 per share, Bloomin' Brands trades at 10.1x forward P/E. Dive into our free research report to see why there are better opportunities than BLMN.
First Bancorp (FBNC)
Market Cap: $2.66 billion
Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ:FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.
Why Do We Think Twice About FBNC?
- Muted 2% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Estimated net interest income growth of 4.4% for the next 12 months implies demand will slow from its five-year trend
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
First Bancorp is trading at $64.22 per share, or 1.6x forward P/B. Read our free research report to see why you should think twice about including FBNC in your portfolio.
Select Water Solutions (WTTR)
Market Cap: $2.43 billion
Managing over 24 billion barrels of produced water annually across major U.S. shale plays, Select Water Solutions (NYSE:WTTR) provides water sourcing, recycling, disposal, and treatment services for oil and gas producers.
Why Does WTTR Worry Us?
- Revenue base of $1.40 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Gross margin of 23.5% is below its competitors, leaving less money to invest in exploration and production
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.1% for the last five years
Select Water Solutions’s stock price of $19.44 implies a valuation ratio of 38.1x forward P/E. To fully understand why you should be careful with WTTR, check out our full research report (it’s free).
Stocks We Like More
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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.