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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Columbus McKinnon (CMCO)
Market cap: $435.2 million
With 19 different brands across the globe, Columbus McKinnon (NASDAQ:CMCO) offers material handling equipment for the construction, manufacturing, and transportation industries.
Why Are We Wary of CMCO?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 14.7% annually while its revenue grew
- Free cash flow margin shrank by 11.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $15.26 per share, Columbus McKinnon trades at 7.5x forward P/E. If you’re considering CMCO for your portfolio, see our FREE research report to learn more.
Bank of Hawaii (BOH)
Market cap: $2.77 billion
Founded in 1897 as a financial anchor for the newly annexed Hawaiian territory, Bank of Hawaii (NYSE:BOH) is a financial institution providing banking, investment, and insurance services primarily to customers in Hawaii, Guam, and other Pacific Islands.
Why Does BOH Fall Short?
- Net interest income trends were unexciting over the last five years as its 4.3% annual growth was below the typical banking firm
- Net interest margin of 2.6% is well below other banks, signaling its loans aren’t very profitable
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
Bank of Hawaii is trading at $70.62 per share, or 1.8x forward P/B. Read our free research report to see why you should think twice about including BOH in your portfolio.
Garrett Motion (GTX)
Market cap: $4.19 billion
A key player in the transition to cleaner vehicles, Garrett Motion (NYSE:GTX) designs and manufactures turbochargers, air compressors, and electric motor technologies for vehicle manufacturers and industrial applications.
Why Is GTX Not Exciting?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.8%
- High input costs result in an inferior gross margin of 20% that must be offset through higher volumes
Garrett Motion’s stock price of $22.46 implies a valuation ratio of 7.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than GTX.
High-quality stocks for all market conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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.