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.
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 is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Shoe Carnival (SCVL)
Market Cap: $487.8 million
Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ: SCVL) is a retailer that sells footwear from mainstream brands for the entire family.
Why Do We Pass on SCVL?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Smaller revenue base of $1.15 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Free cash flow margin shrank by 6 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
At $17.29 per share, Shoe Carnival trades at 11.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SCVL.
REV Group (REVG)
Market Cap: $2.55 billion
Offering the first full-electric North American fire truck, REV (NYSE: REVG) manufactures and sells specialty vehicles.
Why Is REVG Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.4% annually over the last two years
- Gross margin of 12.2% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Poor expense management has led to an operating margin of 3.5% that is below the industry average
REV Group’s stock price of $52.32 implies a valuation ratio of 16.1x forward P/E. To fully understand why you should be careful with REVG, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Community Bank (CBU)
Market Cap: $2.95 billion
Tracing its roots back to 1866 in upstate New York, Community Financial System (NYSE: CBU) is a financial holding company that provides banking, employee benefits, wealth management, and insurance services to retail, commercial, and municipal customers.
Why Are We Positive On CBU?
- Impressive 10.8% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings per share grew by 5.5% annually over the last two years, massively outpacing its peers
- Expected tangible book value per share growth of 20.2% for the next year suggests its capital position will strengthen considerably
Community Bank is trading at $55.95 per share, or 1.5x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
