1 Russell 2000 Stock on Our Buy List and 2 We Find Risky

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.

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:

ScanSource (SCSC)

Market Cap: $978.2 million

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Is SCSC Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.4% annually over the last two years
2. Earnings per share have contracted by 3.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. ROIC of 8.1% reflects management’s challenges in identifying attractive investment opportunities

ScanSource’s stock price of $44.70 implies a valuation ratio of 11.8x forward P/E. Dive into our free research report to see why there are better opportunities than SCSC.

StoneX (SNEX)

Market Cap: $5.46 billion

Originally known as INTL FCStone until its 2020 rebranding, StoneX Group (NASDAQ:SNEX) provides a global financial services network connecting companies, traders, and investors to markets through clearing, execution, and advisory services.

Why Is SNEX Not Exciting?

1. Earnings growth underperformed the sector average over the last four years as its EPS grew by just 3.2% annually
2. Elevated debt-to-equity ratio of 7.2× suggests the firm is overleveraged and may struggle to secure additional financing

StoneX is trading at $105.30 per share, or 2.5x forward P/E. If you’re considering SNEX for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

CSW (CSW)

Market Cap: $4.47 billion

With over two centuries of combined operations manufacturing and supplying, CSW (NASDAQ:CSW) offers special chemicals, coatings, sealants, and lubricants for various industries.

Why Should You Buy CSW?

1. Market share has increased this cycle as its 19.6% annual revenue growth over the last five years was exceptional
2. Incremental sales over the last five years have been highly profitable as its earnings per share increased by 25.9% annually, topping its revenue gains
3. Robust free cash flow margin of 15.5% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute

At $265.95 per share, CSW trades at 26.6x 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

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Strong Momentum 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-micro-cap company Tecnoglass (+1,754% 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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