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 that may face some trouble.
Two Stocks to Sell:
PagerDuty (PD)
Market Cap: $621.9 million
Born from the frustration of developers being woken up by unprioritized alerts, PagerDuty (NYSE:PD) is a digital operations management platform that helps organizations detect and respond to IT incidents, outages, and other critical issues in real-time.
Why Are We Out on PD?
- Products, pricing, or go-to-market strategy may need some adjustments as its 2.5% average billings growth over the last year was weak
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Free cash flow margin is forecasted to shrink by 2.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
PagerDuty is trading at $7.32 per share, or 1.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PD.
NBT Bancorp (NBTB)
Market Cap: $2.30 billion
Tracing its roots back to 1856 when it first opened its doors in Norwich, New York, NBT Bancorp (NASDAQ:NBTB) is a community-oriented financial institution providing banking, wealth management, and insurance services to individuals and businesses across the northeastern United States.
Why Are We Wary of NBTB?
- 9.3% annual revenue growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 6.7% for the next 12 months implies demand will slow from its five-year trend
- Performance over the past five years shows its incremental sales were less profitable, as its 4.8% annual earnings per share growth trailed its revenue gains
NBT Bancorp’s stock price of $44.19 implies a valuation ratio of 1.1x forward P/B. Read our free research report to see why you should think twice about including NBTB in your portfolio.
One Stock to Watch:
The Ensign Group (ENSG)
Market Cap: $10.65 billion
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ:ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Are We Fans of ENSG?
- Annual revenue growth of 19.3% over the last two years was superb and indicates its market share increased during this cycle
- Expected revenue growth of 20.6% for the next year suggests its market share will rise
- Earnings per share grew by 16.4% annually over the last five years, massively outpacing its peers
At $183.83 per share, The Ensign Group trades at 24x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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.