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 best left off your watchlist.
Two Stocks to Sell:
AMC Networks (AMCX)
Market Cap: $354.1 million
Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ:AMCX) is a broadcaster producing a diverse range of television shows and movies.
Why Should You Sell AMCX?
- Annual sales declines of 3.9% for the past five years show its products and services struggled to connect with the market
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3.3 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
AMC Networks is trading at $8.47 per share, or 5x forward P/E. If you’re considering AMCX for your portfolio, see our FREE research report to learn more.
Viasat (VSAT)
Market Cap: $8.67 billion
Operating a fleet of 23 satellites that orbit the Earth and beam connectivity from space, Viasat (NASDAQ:VSAT) provides satellite-based communications networks and services for airlines, maritime vessels, governments, businesses, and residential customers worldwide.
Why Does VSAT Worry Us?
- Issuance of new shares over the last five years caused its earnings per share to fall by 2.6% annually while its revenue grew
- Cash-burning history makes us doubt the long-term viability of its business model
- Negative returns on capital show that some of its growth strategies have backfired
Viasat’s stock price of $63.63 implies a valuation ratio of 88.4x forward P/E. Check out our free in-depth research report to learn more about why VSAT doesn’t pass our bar.
One Stock to Watch:
Standex (SXI)
Market Cap: $3.05 billion
Holding over 500 patents globally, Standex (NYSE:SXI) is a manufacturer and distributor of industrial components for various sectors.
Why Could SXI Be a Winner?
- Solid 10.2% annual revenue growth over the last two years indicates its offering’s solve complex business issues
- Highly efficient business model is illustrated by its impressive 15.2% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 17.3% exceeded its revenue gains over the last five years
At $251.36 per share, Standex trades at 26.1x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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