Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
OneWater (ONEW)
Market Cap: $264.9 million
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Are We Cautious About ONEW?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Gross margin of 24.2% is below its competitors, leaving less money for marketing and promotions
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
OneWater’s stock price of $16.18 implies a valuation ratio of 11.4x forward P/E. Dive into our free research report to see why there are better opportunities than ONEW.
Cable One (CABO)
Market Cap: $1.00 billion
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Do We Avoid CABO?
- Sluggish trends in its residential data subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Sales are projected to tank by 3.2% over the next 12 months as its demand continues evaporating
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Cable One is trading at $178.48 per share, or 5.1x forward P/E. Check out our free in-depth research report to learn more about why CABO doesn’t pass our bar.
Columbia Financial (CLBK)
Market Cap: $1.56 billion
Founded during the Roaring Twenties in 1926 and headquartered in Fair Lawn, New Jersey, Columbia Financial (NASDAQ: CLBK) operates federally chartered savings banks in New Jersey that offer traditional banking services including loans, deposits, and insurance products.
Why Do We Pass on CLBK?
- Net interest income was flat over the last five years, indicating it’s failed to expand this cycle
- Net interest margin shrank by 54 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 26.8% annually, worse than its revenue
Columbia Financial trades at a stock price of $14.89. To fully understand why you should be careful with CLBK, check out our full research report (it’s free for active Edge members).
Stocks We Like More
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