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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. Keeping that in mind, here is one Russell 2000 stock that could be a breakout winner and two best left off your watchlist.
Two Stocks to Sell:
Lantheus (LNTH)
Market Cap: $6.54 billion
Pioneering the "Find, Fight and Follow" approach to disease management, Lantheus Holdings (NASDAQGM:LNTH) develops and commercializes radiopharmaceuticals and other imaging agents that help healthcare professionals detect, diagnose, and treat diseases.
Why Does LNTH Give Us Pause?
- Sales trends were unexciting over the last two years as its 4% annual growth was below the typical healthcare company
- Forecasted revenue decline of 1.2% for the upcoming 12 months implies demand will fall off a cliff
- Efficiency has decreased over the last two years as its adjusted operating margin fell by 9.9 percentage points
At $100.15 per share, Lantheus trades at 17.3x forward P/E. If you’re considering LNTH for your portfolio, see our FREE research report to learn more.
Coastal Financial (CCB)
Market Cap: $622.8 million
Pioneering the intersection of traditional banking and financial technology in the Pacific Northwest, Coastal Financial (NASDAQ:CCB) operates as a bank holding company that provides traditional banking services and Banking-as-a-Service (BaaS) solutions to consumers and businesses.
Why Is CCB Not Exciting?
- Net interest margin increased by 2.8 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more capital to invest or return to shareholders
- Efficiency ratio failed to improve over the last five years, indicating the firm couldn’t optimize its expenses
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 16.7% annually while its revenue grew
Coastal Financial is trading at $40.75 per share, or 1.3x forward P/B. Read our free research report to see why you should think twice about including CCB in your portfolio.
One Stock to Watch:
Stock Yards Bank (SYBT)
Market Cap: $2.33 billion
Founded in 1904 in Louisville and named after the city's historic livestock market district, Stock Yards Bancorp (NASDAQ:SYBT) operates a regional bank providing commercial banking, wealth management, and trust services across Kentucky, Indiana, and Ohio.
Why Does SYBT Stand Out?
- Impressive 16.6% annual net interest income growth over the last five years indicates it’s winning market share this cycle
- Net interest margin grew by 41.7 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
- Annual tangible book value per share growth of 10.4% over the last five years was superb and indicates its capital strength increased during this cycle
Stock Yards Bank’s stock price of $75.07 implies a valuation ratio of 1.8x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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