2 Russell 2000 Stocks on Our Watchlist and 1 We Ignore

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.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here are two Russell 2000 stocks that could deliver strong gains and one best left off your watchlist.

One Stock to Sell:

nLIGHT (LASR)

Market Cap: $1.93 billion

Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ:LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.

Why Should You Sell LASR?

1. Sales trends were unexciting over the last five years as its 2.6% annual growth was below the typical industrials company
2. Increased cash burn over the last five years raises questions about the return timeline for its investments
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

nLIGHT is trading at $38.32 per share, or 140.5x forward P/E. If you’re considering LASR for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

HNI (HNI)

Market Cap: $1.96 billion

With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.

Why Do We Like HNI?

1. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
2. Share buybacks catapulted its annual earnings per share growth to 25.4%, which outperformed its revenue gains over the last two years
3. Returns on capital are growing as management capitalizes on its market opportunities

At $42.74 per share, HNI trades at 11x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.

Piper Sandler (PIPR)

Market Cap: $6.48 billion

Tracing its roots back to 1895 and rebranded from Piper Jaffray in 2020, Piper Sandler (NYSE:PIPR) is an investment bank that provides advisory services, capital raising, institutional brokerage, and research for corporations, governments, and institutional investors.

Why Are We Bullish on PIPR?

1. Annual revenue growth of 17.4% over the past two years was outstanding, reflecting market share gains this cycle
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 35.2% outpaced its revenue gains
3. Impressive 12.8% annual tangible book value per share growth over the last two years indicates it’s building equity value this cycle

Piper Sandler’s stock price of $367.49 implies a valuation ratio of 20x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

Stocks We Like Even More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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 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.