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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
The Real Brokerage (REAX)
Market Cap: $367 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 Dump REAX?
- Subpar operating margin of -0.6% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Earnings growth over the last four years fell short of the peer group average as its EPS only increased by 8.5% annually
- Low free cash flow margin of 3.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $1.71 per share, The Real Brokerage trades at 0.2x trailing 12-month price-to-sales. If you’re considering REAX for your portfolio, see our FREE research report to learn more.
Peoples Bancorp (PEBO)
Market Cap: $1.19 billion
Founded in 1902 in Ohio and expanding through both organic growth and acquisitions, Peoples Bancorp (NASDAQ: PEBO) is a financial holding company that provides banking, insurance, equipment leasing, and investment services to consumers and businesses.
Why Do We Pass on PEBO?
- 2.1% annual revenue growth over the last two years was slower than its banking peers
- Net interest margin dropped by 35.3 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Incremental sales over the last five years were less profitable as its 2.1% annual earnings per share growth lagged its revenue gains
Peoples Bancorp’s stock price of $33.02 implies a valuation ratio of 1x forward P/B. Check out our free in-depth research report to learn more about why PEBO doesn’t pass our bar.
Eastern Bank (EBC)
Market Cap: $4.20 billion
Founded in 1818 as one of America's oldest mutual banks before converting to a public company in 2020, Eastern Bankshares (NASDAQ: EBC) operates as a bank holding company providing commercial and retail banking services primarily in Massachusetts, New Hampshire, and Rhode Island.
Why Are We Hesitant About EBC?
- Inferior net interest margin of 3.3% means it must compensate for lower profitability through increased loan originations
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 5.1% annually over the last five years
- ROE of 2.8% reflects management’s challenges in identifying attractive investment opportunities
Eastern Bank is trading at $19.19 per share, or 1x forward P/B. If you’re considering EBC for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
