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.
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 deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Varonis Systems (VRNS)
Market Cap: $3.84 billion
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ: VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Is VRNS Risky?
- Annual revenue growth of 16.1% over the last five years was below our standards for the software sector
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Efficiency has decreased over the last year as its operating margin fell by 2.5 percentage points
Varonis Systems is trading at $33.40 per share, or 5x forward price-to-sales. If you’re considering VRNS for your portfolio, see our FREE research report to learn more.
ePlus (PLUS)
Market Cap: $2.17 billion
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Why Are We Hesitant About PLUS?
- Muted 4.8% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Incremental sales over the last two years were less profitable as its 3.2% annual earnings per share growth lagged its revenue gains
- Free cash flow margin dropped by 2.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $81.81 per share, ePlus trades at 15.1x forward P/E. Read our free research report to see why you should think twice about including PLUS in your portfolio.
One Stock to Buy:
Vita Coco (COCO)
Market Cap: $4.49 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
Why Do We Love COCO?
- Unit sales were phenomenal over the past two years, showing demand is robust and retailers can’t stock enough of its products
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 52.4% annually
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are climbing as it finds even more attractive growth opportunities
Vita Coco’s stock price of $83.93 implies a valuation ratio of 46x forward P/E. Is now the right time to buy? See for yourself in our in-depth 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%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. 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 (+1,326% 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.
