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. That said, here is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
RE/MAX (RMAX)
Market Cap: $155.6 million
Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.
Why Are We Out on RMAX?
- Performance surrounding its agents has lagged its peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.1% annually
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
RE/MAX is trading at $7.76 per share, or 6.3x forward P/E. Dive into our free research report to see why there are better opportunities than RMAX.
Byrna (BYRN)
Market Cap: $407.7 million
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ:BYRN) is a provider of non-lethal weapons.
Why Is BYRN Not Exciting?
- Poor expense management has led to operating margin losses
- Cash-burning history makes us doubt the long-term viability of its business model
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Byrna’s stock price of $17.98 implies a valuation ratio of 19.7x forward EV-to-EBITDA. To fully understand why you should be careful with BYRN, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Itron (ITRI)
Market Cap: $4.64 billion
Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ:ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.
Why Do We Like ITRI?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Additional sales over the last two years increased its profitability as the 46% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin expanded by 7.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $103.50 per share, Itron trades at 15.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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