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 are two Russell 2000 stocks that could be the next breakout winners and one best left off your watchlist.
One Stock to Sell:
Borr Drilling (BORR)
Market Cap: $1.38 billion
Operating one of the world's youngest jack-up fleets with an average age under eight years, Borr Drilling (NYSE: BORR) operates jack-up rigs that drill oil and gas wells in shallow waters up to 400 feet deep for exploration and production companies.
Why Does BORR Fall Short?
- Subscale operations are evident in its revenue base of $1.02 billion, meaning it has fewer distribution channels than its larger rivals
- Cash burn makes us question whether it can achieve sustainable long-term growth
At $4.52 per share, Borr Drilling trades at 8.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BORR.
Two Stocks to Watch:
EnerSys (ENS)
Market Cap: $6.48 billion
Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE: ENS) manufactures various kinds of batteries for a range of industries.
Why Are We Fans of ENS?
- Operating margin improvement of 7.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 20% exceeded its revenue gains over the last two years
- Free cash flow margin increased by 23.8 percentage points over the last five years, giving the company more capital to invest or return to shareholders
EnerSys is trading at $179.96 per share, or 13.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
BrightSpring Health Services (BTSG)
Market Cap: $11.79 billion
Founded in 1974, BrightSpring Health Services (NASDAQ: BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.
Why Are We Positive on BTSG?
- Market share has increased this cycle as its 23.9% annual revenue growth over the last two years was exceptional
- Economies of scale give it more fixed cost leverage than its smaller competitors
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
BrightSpring Health Services’s stock price of $57.31 implies a valuation ratio of 27.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
