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. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Caleres (CAL)
Market Cap: $465.4 million
The owner of Dr. Scholl's, Caleres (NYSE:CAL) is a footwear company offering a range of styles.
Why Do We Avoid CAL?
- Annual revenue growth of 3.8% over the last five years was below our standards for the consumer discretionary sector
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Caleres’s stock price of $13.73 implies a valuation ratio of 13x forward P/E. Check out our free in-depth research report to learn more about why CAL doesn’t pass our bar.
Neogen (NEOG)
Market Cap: $2.01 billion
Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ:NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.
Why Should You Sell NEOG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.1% annually over the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
At $9.20 per share, Neogen trades at 34x forward P/E. Dive into our free research report to see why there are better opportunities than NEOG.
Independent Bank (INDB)
Market Cap: $3.79 billion
Tracing its roots back to 1907 and serving as a financial cornerstone in New England for over a century, Independent Bank Corp. (NASDAQ:INDB) operates as the holding company for Rockland Trust, providing banking, investment, and financial services across Eastern Massachusetts and Rhode Island.
Why Do We Think INDB Will Underperform?
- Annual revenue growth of 1.6% over the last two years was below our standards for the banking sector
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 6.9% annually while its revenue grew
- Muted 4.6% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its banking peers
Independent Bank is trading at $76.45 per share, or 1.1x forward P/B. To fully understand why you should be careful with INDB, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.