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.
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.
Rush Street Interactive (RSI)
Market Cap: $3.06 billion
Specializing in online casino gaming and sports betting, Rush Street Interactive (NYSE:RSI) is an operator of digital gaming platforms.
Why Do We Steer Clear of RSI?
- Muted 27.1% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Rush Street Interactive is trading at $26.42 per share, or 35.1x forward P/E. Check out our free in-depth research report to learn more about why RSI doesn’t pass our bar.
Carriage Services (CSV)
Market Cap: $516.5 million
Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.
Why Are We Bearish on CSV?
- Muted 3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Poor free cash flow margin of 10.5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Returns on capital haven’t budged, indicating management couldn’t drive additional value creation
At $32.53 per share, Carriage Services trades at 9.2x forward P/E. Dive into our free research report to see why there are better opportunities than CSV.
Plug Power (PLUG)
Market Cap: $2.93 billion
Powering forklifts for Walmart’s distribution centers, Plug Power (NASDAQ:PLUG) provides hydrogen fuel cells used to power electric motors.
Why Are We Hesitant About PLUG?
- Muted 4.3% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Plug Power’s stock price of $2.10 implies a valuation ratio of 3.3x forward price-to-sales. To fully understand why you should be careful with PLUG, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.