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.
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 that don’t make the cut and some better choices instead.
Perdoceo Education (PRDO)
Market Cap: $2.05 billion
Formerly known as Career Education Corporation, Perdoceo Education (NASDAQ: PRDO) is an educational services company that specializes in postsecondary education.
Why Does PRDO Fall Short?
- Muted 1.3% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Eroding returns on capital suggest its historical profit centers are aging
Perdoceo Education’s stock price of $31.38 implies a valuation ratio of 12.9x forward EV-to-EBITDA. To fully understand why you should be careful with PRDO, check out our full research report (it’s free).
Omnicell (OMCL)
Market Cap: $1.31 billion
Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ: OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.
Why Is OMCL Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.4% annually over the last two years
- Smaller revenue base of $1.14 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.5% annually
At $27.23 per share, Omnicell trades at 15.2x forward P/E. Read our free research report to see why you should think twice about including OMCL in your portfolio.
Warby Parker (WRBY)
Market Cap: $2.15 billion
Founded in 2010, Warby Parker (NYSE: WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.
Why Are We Cautious About WRBY?
- Modest revenue base of $795.1 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Poor expense management has led to operating losses
- Push for growth has led to negative returns on capital, signaling value destruction
Warby Parker is trading at $17.55 per share, or 47.3x forward P/E. If you’re considering WRBY for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
