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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are two Russell 2000 stocks that could be the next breakout winners and one that may struggle to keep up.
One Stock to Sell:
PacBio (PACB)
Market Cap: $567.6 million
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ: PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Do We Pass on PACB?
- Annual sales declines of 4.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Increased cash burn over the last five years raises questions about the return timeline for its investments
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
PacBio’s stock price of $1.88 implies a valuation ratio of 3.2x forward price-to-sales. Check out our free in-depth research report to learn more about why PACB doesn’t pass our bar.
Two Stocks to Watch:
Commvault (CVLT)
Market Cap: $5.61 billion
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Why Could CVLT Be a Winner?
- Billings have averaged 25.4% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Software is difficult to replicate at scale and leads to a stellar gross margin of 81.5%
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
At $127.25 per share, Commvault trades at 4.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Axos Financial (AX)
Market Cap: $5.04 billion
Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE: AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.
Why Should You Buy AX?
- Impressive 17.6% annual net interest income growth over the last five years indicates it’s winning market share this cycle
- Differentiated product suite results in a Strong performance of its loan book leads to a High-yielding loan book and low cost of funds are reflected in its best-in-class net interest margin of 4.8%
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
Axos Financial is trading at $89.00 per share, or 1.6x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out 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 244% over the last five years (as of June 30, 2025).
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-micro-cap company Tecnoglass (+1,754% 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.
