3 Russell 2000 Stocks We Keep Off Our Radar

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.

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 are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.

Tenable (TENB)

Market Cap: $2.71 billion

Starting with the widely-used Nessus vulnerability scanner first released in 1998, Tenable (NASDAQ:TENB) provides exposure management solutions that help organizations identify, assess, and prioritize cybersecurity vulnerabilities across their IT infrastructure and cloud environments.

Why Does TENB Worry Us?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 10.4% average billings growth over the last year was weak
2. Estimated sales growth of 7.1% for the next 12 months implies demand will slow from its two-year trend
3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

At $22.74 per share, Tenable trades at 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why TENB doesn’t pass our bar.

Bumble (BMBL)

Market Cap: $407 million

Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ:BMBL) is a leading dating app built with women at the center.

Why Are We Cautious About BMBL?

1. May need to improve its platform and marketing strategy as its 4.8% average growth in paying users underwhelmed
2. Demand has fallen off a cliff over the last two years as its average revenue per buyer fell by 3.9% annually while it struggled to expand its customer base
3. Estimated sales decline of 13.8% for the next 12 months implies a challenging demand environment

Bumble is trading at $3.63 per share, or 3.4x forward EV/EBITDA. To fully understand why you should be careful with BMBL, check out our full research report (it’s free).

Walker & Dunlop (WD)

Market Cap: $2.22 billion

Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE:WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.

Why Is WD Not Exciting?

1. Net interest income tumbled by 43.8% annually over the last five years, showing market trends are working against its favor during this cycle
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.7% annually
3. Annual tangible book value per share declines of 4.4% for the past five years show its capital management struggled during this cycle

Walker & Dunlop’s stock price of $65.12 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including WD in your portfolio.

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