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.
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 is one Russell 2000 stock that could be the next big thing and two best left off your watchlist.
Two Stocks to Sell:
Accel Entertainment (ACEL)
Market Cap: $968.5 million
Established in Illinois, Accel Entertainment (NYSE: ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.
Why Do We Think ACEL Will Underperform?
- Sluggish trends in its video gaming terminals sold suggest customers aren’t adopting its solutions as quickly as the company hoped
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Unchanged returns on capital make it difficult for the company’s valuation multiple to re-rate
At $11.65 per share, Accel Entertainment trades at 13.3x forward P/E. If you’re considering ACEL for your portfolio, see our FREE research report to learn more.
Lovesac (LOVE)
Market Cap: $233.6 million
Known for its oversized, premium beanbags, Lovesac (NASDAQ: LOVE) is a specialty furniture brand selling modular furniture.
Why Is LOVE Risky?
- Muted 19.5% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Poor free cash flow margin of 1.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Lovesac is trading at $16 per share, or 11.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than LOVE.
One Stock to Buy:
Vital Farms (VITL)
Market Cap: $1.32 billion
With an emphasis on ethically produced products, Vital Farms (NASDAQ: VITL) specializes in pasture-raised eggs and butter.
Why Do We Love VITL?
- Stellar 21.9% growth in unit sales over the past two years demonstrates the high demand for its products
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Earnings per share grew by 143% annually over the last three years and trumped its peers
Vital Farms’s stock price of $29.48 implies a valuation ratio of 18x forward P/E. Is now a good time to buy? See for yourself in our comprehensive 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 Growth Stocks for this month. 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.
