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.
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 are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Pitney Bowes (PBI)
Market Cap: $2.40 billion
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE:PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Why Is PBI Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 13% annually over the last five years
- Forecasted revenue decline of 1.7% for the upcoming 12 months implies demand will fall even further
Pitney Bowes is trading at $17.53 per share, or 10.3x forward P/E. To fully understand why you should be careful with PBI, check out our full research report (it’s free).
Piper Sandler (PIPR)
Market Cap: $5.39 billion
Tracing its roots back to 1895 and rebranded from Piper Jaffray in 2020, Piper Sandler (NYSE:PIPR) is an investment bank that provides advisory services, capital raising, institutional brokerage, and research for corporations, governments, and institutional investors.
Why Does PIPR Fall Short?
- 5% annual revenue growth over the last five years was slower than its financials peers
- Incremental sales over the last five years were less profitable as its 3.3% annual earnings per share growth lagged its revenue gains
- 5.6% annual tangible book value per share growth over the last five years was slower than its financials peers
Piper Sandler’s stock price of $75.60 implies a valuation ratio of 15.2x forward P/E. Read our free research report to see why you should think twice about including PIPR in your portfolio.
City Holding (CHCO)
Market Cap: $2.04 billion
With roots dating back to 1957 and a strategic presence along the I-64 and I-81 corridors, City Holding (NASDAQGS:CHCO) operates as a financial holding company providing banking, trust, and investment services through its subsidiary City National Bank across West Virginia, Kentucky, Virginia, and Ohio.
Why Does CHCO Give Us Pause?
- Net interest income trends were unexciting over the last five years as its 9.8% annual growth was below the typical banking firm
- Estimated net interest income growth of 3.2% for the next 12 months implies demand will slow from its five-year trend
- Earnings per share lagged its peers over the last two years as they only grew by 8.6% annually
At $145.11 per share, City Holding trades at 2.4x forward P/B. Dive into our free research report to see why there are better opportunities than CHCO.
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