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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Casella Waste Systems (CWST)
Market Cap: $5.61 billion
Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ:CWST) offers waste management services for businesses, residents, and the government.
Why Are We Cautious About CWST?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 5 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
Casella Waste Systems is trading at $87.01 per share, or 73.4x forward P/E. To fully understand why you should be careful with CWST, check out our full research report (it’s free for active Edge members).
Omnicell (OMCL)
Market Cap: $1.60 billion
Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ:OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.
Why Do We Think OMCL Will Underperform?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 9.5 percentage points
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 5.4% annually
At $35.76 per share, Omnicell trades at 20.3x forward P/E. If you’re considering OMCL for your portfolio, see our FREE research report to learn more.
Farmer Mac (AGM)
Market Cap: $1.73 billion
Created by Congress in 1987 to build a bridge between Wall Street and rural America, Farmer Mac (NYSE:AGM) provides a secondary market for agricultural and rural loans, helping lenders increase their liquidity and lending capacity to serve rural America.
Why Are We Wary of AGM?
- Muted 5.8% annual revenue growth over the last two years shows its demand lagged behind its financials peers
- Earnings per share lagged its peers over the last two years as they only grew by 7.5% annually
- Debt-to-equity ratio of 19.6× is concerningly high, indicating excessive leverage that could limit financial flexibility
Farmer Mac’s stock price of $162.19 implies a valuation ratio of 8.7x forward P/E. Dive into our free research report to see why there are better opportunities than AGM.
Stocks We Like More
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Don’t let fear keep you from great opportunities and take a look at 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).
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