3 Russell 2000 Stocks We Approach with Caution

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. That said, here are three Russell 2000 stocks to avoid and better alternatives to consider.

8x8 (EGHT)

Market Cap: $232.9 million

Named after its founding year (1987) with "8x8" representing binary code for communications, 8x8 (NASDAQ:EGHT) provides cloud-based contact center and unified communications solutions that enable businesses to manage customer interactions and internal communications through a single platform.

Why Do We Pass on EGHT?

1. Offerings struggled to generate interest as its billings were flat over the last year
2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low

8x8 is trading at $1.69 per share, or 0.3x forward price-to-sales. To fully understand why you should be careful with EGHT, check out our full research report (it’s free).

Omnicell (OMCL)

Market Cap: $2.26 billion

Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ:OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.

Why Should You Sell OMCL?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 9.5 percentage points
3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 5.4% annually

Omnicell’s stock price of $51.91 implies a valuation ratio of 28.8x forward P/E. Check out our free in-depth research report to learn more about why OMCL doesn’t pass our bar.

Fulton Financial (FULT)

Market Cap: $3.63 billion

Tracing its roots back to 1882 in the heart of Pennsylvania, Fulton Financial (NASDAQ:FULT) is a financial holding company that provides banking, lending, and wealth management services to consumers and businesses across five Mid-Atlantic states.

Why Are We Wary of FULT?

1. Muted 8.7% annual revenue growth over the last five years shows its demand lagged behind its banking peers
2. Efficiency ratio is expected to be the same next year, suggesting its fixed cost leverage is currently maxed out
3. Estimated tangible book value per share growth of 7.3% for the next 12 months implies profitability will slow from its two-year trend

At $20.19 per share, Fulton Financial trades at 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than FULT.

Stocks We Like More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.