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 is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
Cars.com (CARS)
Market Cap: $686.1 million
Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE: CARS) is a digital marketplace that connects new and used car buyers and sellers.
Why Are We Hesitant About CARS?
- Market opportunities are plateauing as its dealer customers were flat over the last two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.5%
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
At $11.47 per share, Cars.com trades at 5x forward EV/EBITDA. Check out our free in-depth research report to learn more about why CARS doesn’t pass our bar.
The Real Brokerage (REAX)
Market Cap: $554.7 million
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Should You Sell REAX?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Flat earnings per share over the last three years lagged its peers
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
The Real Brokerage is trading at $2.64 per share, or 6.7x forward EV-to-EBITDA. If you’re considering REAX for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
LegalZoom (LZ)
Market Cap: $1.17 billion
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Could LZ Be a Winner?
- Subscription Units have increased by an average of 12.5% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Platform’s growing usage and its ability to increase user spending by 52.9% annually showcases its high switching costs
- Free cash flow margin expanded by 11.2 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
LegalZoom’s stock price of $6.49 implies a valuation ratio of 5.6x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
