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. That said, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
Photronics (PLAB)
Market Cap: $1.98 billion
Sporting a global footprint of facilities, Photronics (NASDAQ:PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Why Does PLAB Give Us Pause?
- Sales tumbled by 1.4% annually over the last two years, showing market trends are working against it during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.8%
- Gross margin of 35% reflects its high production costs
Photronics is trading at $33.50 per share, or 18.2x forward P/E. Read our free research report to see why you should think twice about including PLAB in your portfolio.
Vestis (VSTS)
Market Cap: $1.77 billion
Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE:VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.
Why Do We Pass on VSTS?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.2% annually over the last two years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Earnings per share have contracted by 50.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
Vestis’s stock price of $13.41 implies a valuation ratio of 18.4x forward P/E. Check out our free in-depth research report to learn more about why VSTS doesn’t pass our bar.
One Stock to Watch:
Douglas Dynamics (PLOW)
Market Cap: $968.8 million
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE:PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Are We Fans of PLOW?
- Annual revenue growth of 10.4% over the last two years beat the sector average and underscores the unique value of its offerings
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 43.6% over the last two years outstripped its revenue performance
- Free cash flow margin increased by 11 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $43.24 per share, Douglas Dynamics trades at 13.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.