3 Russell 2000 Stocks We Keep Off Our Radar

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.

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

Utz (UTZ)

Market Cap: $762.3 million

Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE:UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.

Why Should You Sell UTZ?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Revenue base of $1.44 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $8.63 per share, Utz trades at 11.2x forward P/E. Check out our free in-depth research report to learn more about why UTZ doesn’t pass our bar.

Vishay Precision (VPG)

Market Cap: $598.3 million

Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE:VPG) operates as a global provider of precision measurement and sensing technologies.

Why Is VPG Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 7% annually over the last two years
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.2% annually
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Vishay Precision’s stock price of $44.97 implies a valuation ratio of 59.5x forward P/E. Read our free research report to see why you should think twice about including VPG in your portfolio.

AMN Healthcare Services (AMN)

Market Cap: $871 million

With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE:AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.

Why Do We Think AMN Will Underperform?

1. Declining travelers on assignment over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share have contracted by 16.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
3. Diminishing returns on capital suggest its earlier profit pools are drying up

AMN Healthcare Services is trading at $22.54 per share, or 10.7x forward P/E. If you’re considering AMN for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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