The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
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 is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
DXC (DXC)
Market Cap: $1.44 billion
Born from the 2017 merger of Computer Sciences Corporation and HP Enterprise's services business, DXC Technology (NYSE:DXC) is a global IT services company that helps businesses transform their technology infrastructure, applications, and operations.
Why Do We Steer Clear of DXC?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Underwhelming 2.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $9.21 per share, DXC trades at 3.7x forward P/E. To fully understand why you should be careful with DXC, check out our full research report (it’s free).
Donnelley Financial Solutions (DFIN)
Market Cap: $930.3 million
Born from the need to navigate increasingly complex financial regulations in the digital age, Donnelley Financial Solutions (NYSE:DFIN) provides software and technology-enabled services that help companies comply with SEC regulations and manage financial transactions and reporting requirements.
Why Does DFIN Worry Us?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.4% annually over the last five years
- Earnings per share lagged its peers over the last five years as they only grew by 8.4% annually
Donnelley Financial Solutions is trading at $45.04 per share, or 1.5x forward price-to-sales. Read our free research report to see why you should think twice about including DFIN in your portfolio.
One Stock to Watch:
UMB Financial (UMBF)
Market Cap: $10.07 billion
With roots dating back to 1913 and a name derived from "United Missouri Bank," UMB Financial (NASDAQ:UMBF) is a financial holding company that provides banking, asset management, and fund services to commercial, institutional, and individual customers.
Why Do We Like UMBF?
- Market share has increased this cycle as its 21.6% annual net interest income growth over the last five years was exceptional
- Net interest margin expanded by 75.2 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Operating profits are forecasted to increase over the next year as it scales and becomes more productive
UMB Financial’s stock price of $143.74 implies a valuation ratio of 1.3x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.