The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
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. That said, here are two Russell 2000 stocks that could be the next big thing and one that may struggle to keep up.
One Stock to Sell:
Camden National Corporation (CAC)
Market Cap: $966.2 million
Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ:CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.
Why Is CAC Not Exciting?
- Annual net interest income growth of 9.2% over the last five years was below our standards for the banking sector
- Annual earnings per share growth of 1% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Muted 1.1% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
At $57.23 per share, Camden National Corporation trades at 1.3x forward P/B. Read our free research report to see why you should think twice about including CAC in your portfolio.
Two Stocks to Watch:
OSI Systems (OSIS)
Market Cap: $3.15 billion
With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ:OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.
Why Do We Love OSIS?
- Impressive 9.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 14.3% to outpace its revenue gains
- Free cash flow margin jumped by 20.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
OSI Systems’s stock price of $197.29 implies a valuation ratio of 18x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Zurn Elkay (ZWS)
Market Cap: $7.73 billion
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE:ZWS) provides water management solutions to various industries.
Why Do We Like ZWS?
- Solid 9.6% annual revenue growth over the last five years indicates its offerings solve complex business issues
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- ZWS is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
Zurn Elkay is trading at $46.66 per share, or 24.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.