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 struggle to keep up.
Two Stocks to Sell:
Genesco (GCO)
Market Cap: $313.2 million
Spanning a broad range of styles, brands, and prices, Genesco (NYSE: GCO) sells footwear, apparel, and accessories through multiple brands and banners.
Why Do We Avoid GCO?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $29.01 per share, Genesco trades at 15.6x forward P/E. Read our free research report to see why you should think twice about including GCO in your portfolio.
Hilton Grand Vacations (HGV)
Market Cap: $3.55 billion
Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE: HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.
Why Are We Wary of HGV?
- Muted 12.5% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
- High net-debt-to-EBITDA ratio of 11× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Hilton Grand Vacations is trading at $41.45 per share, or 10.6x forward P/E. If you’re considering HGV for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Cadence Bank (CADE)
Market Cap: $7.03 billion
With roots dating back to 1885 and a strategic focus on middle-market commercial lending, Cadence Bancorporation (NYSE: CADE) is a bank holding company that provides commercial banking, retail banking, and wealth management services to middle-market businesses and individuals.
Why Will CADE Beat the Market?
- Annual net interest income growth of 17.8% over the last five years was superb and indicates its market share increased during this cycle
- Net interest margin jumped by 34 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more resources to pursue growth initiatives
- Earnings per share have massively outperformed its peers over the last two years, increasing by 5.3% annually
Cadence Bank’s stock price of $37.74 implies a valuation ratio of 1.2x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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