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.
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. Keeping that in mind, here are two Russell 2000 stocks that could deliver strong gains and one best left off your watchlist.
One Stock to Sell:
Proto Labs (PRLB)
Market Cap: $1.42 billion
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Do We Avoid PRLB?
- Muted 2.9% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Earnings per share have dipped by 7% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Proto Labs’s stock price of $59.73 implies a valuation ratio of 33.2x forward P/E. If you’re considering PRLB for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Inter Parfums (IPAR)
Market Cap: $2.93 billion
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ: IPAR) manufactures and distributes fragrances worldwide.
Why Could IPAR Be a Winner?
- Products command premium prices and lead to a stellar gross margin of 59.5%
- Robust free cash flow margin of 12.7% gives it many options for capital deployment
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Inter Parfums is trading at $91.27 per share, or 18.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Installed Building Products (IBP)
Market Cap: $7.28 billion
Founded in 1977, Installed Building Products (NYSE: IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Why Are We Fans of IBP?
- Annual revenue growth of 12.4% over the last five years was superb and indicates its market share increased during this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 21.4% to outpace its revenue gains
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets
At $262.25 per share, Installed Building Products trades at 23.8x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
