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 struggle to keep up.
Two Stocks to Sell:
PennyMac Financial Services (PFSI)
Market Cap: $3.13 billion
Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services (NYSE:PFSI) is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.
Why Are We Out on PFSI?
- Net interest income tumbled by 27.5% annually over the last five years, showing market trends are working against it during this cycle
- Forecasted net interest income decline of 22.7% for the upcoming 12 months implies demand will fall even further
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 18% annually, worse than its revenue
PennyMac Financial Services is trading at $60.32 per share, or 0.7x forward P/B. If you’re considering PFSI for your portfolio, see our FREE research report to learn more.
Liberty Energy (LBRT)
Market Cap: $2.71 billion
Operating approximately 40 active fleets across North America's most productive shale basins, Liberty Energy (NYSE:LBRT) provides hydraulic fracturing services that help oil and gas companies extract resources from shale formations.
Why Does LBRT Give Us Pause?
- Gross margin of 23.3% is below its competitors, leaving less money to invest in exploration and production
- Poor free cash flow margin of 1.9% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $16.73 per share, Liberty Energy trades at 103.9x forward P/E. Check out our free in-depth research report to learn more about why LBRT doesn’t pass our bar.
One Stock to Watch:
EVERTEC (EVTC)
Market Cap: $1.86 billion
Operating one of Latin America's leading PIN debit networks called ATH, EVERTEC (NYSE:EVTC) is a payment transaction processor and financial technology provider that enables merchants and financial institutions across Latin America and the Caribbean to accept and process electronic payments.
Why Could EVTC Be a Winner?
- 12.6% annual revenue growth over the last two years surpassed the sector average as its products resonated with customers
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
EVERTEC’s stock price of $31.19 implies a valuation ratio of 7.5x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.