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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here is one Russell 2000 stock that could be the next big thing and two that may face some trouble.
Two Stocks to Sell:
iHeartMedia (IHRT)
Market Cap: $618 million
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ: IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Do We Steer Clear of IHRT?
- Lackluster 6.5% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
iHeartMedia’s stock price of $4.00 implies a valuation ratio of 0.1x forward price-to-sales. Read our free research report to see why you should think twice about including IHRT in your portfolio.
PennyMac Mortgage Investment Trust (PMT)
Market Cap: $862.4 million
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE: PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
Why Do We Think PMT Will Underperform?
- Annual sales declines of 23.1% for the past five years show its products and services struggled to connect with the market during this cycle
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 30.1% annually, worse than its revenue
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 6.3% annually over the last five years
PennyMac Mortgage Investment Trust is trading at $10.18 per share, or 0.7x forward P/B. If you’re considering PMT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Granite Construction (GVA)
Market Cap: $6.08 billion
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
Why Should You Buy GVA?
- Impressive 13.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 37.4% to outpace its revenue gains
- Free cash flow margin expanded by 11.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $140.58 per share, Granite Construction trades at 1.1x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
