1 Russell 2000 Stock with Competitive Advantages and 2 Facing Headwinds

Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.

Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.

Two Stocks to Sell:

Yext (YEXT)

Market Cap: $1.04 billion

Founded in 2006 by Howard Lerman, Yext (NYSE:YEXT) offers software as a service that helps their clients manage and monitor their online listings and customer reviews across all relevant databases, from Google Maps to Alexa or Siri.

Why Does YEXT Give Us Pause?

1. Underwhelming ARR growth of 8.8% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
2. Anticipated sales growth of 4.7% for the next year implies demand will be shaky
3. Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue

Yext’s stock price of $8.46 implies a valuation ratio of 2.4x forward price-to-sales. Check out our free in-depth research report to learn more about why YEXT doesn’t pass our bar.

Xerox (XRX)

Market Cap: $764.8 million

Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ:XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.

Why Should You Dump XRX?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.7% annually over the last five years
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Xerox is trading at $6.08 per share, or 6.2x forward P/E. Read our free research report to see why you should think twice about including XRX in your portfolio.

One Stock to Watch:

Griffon (GFF)

Market Cap: $3.89 billion

Initially in the defense industry, Griffon (NYSE:GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.

Why Are We Fans of GFF?

1. Operating margin improvement of 7.8 percentage points over the last five years demonstrates its ability to scale efficiently
2. Additional sales over the last five years increased its profitability as the 32.6% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin expanded by 10 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

At $82.50 per share, Griffon trades at 13.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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