1 Russell 2000 Stock on Our Watchlist and 2 We Question

Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.

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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.

Two Stocks to Sell:

American Express Global Business Travel (GBTG)

Market Cap: $3.03 billion

Originally spun off from American Express in 2014 but maintaining the Amex GBT brand, Global Business Travel Group (NYSE:GBTG) provides end-to-end business travel and expense management solutions, connecting corporate clients with travel suppliers and offering specialized software services.

Why Do We Think GBTG Will Underperform?

1. Muted 5.3% annual revenue growth over the last two years shows its demand lagged behind its software peers
2. Gross margin of 61% reflects its relatively high servicing costs
3. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient

At $5.80 per share, American Express Global Business Travel trades at 0.9x forward price-to-sales. If you’re considering GBTG for your portfolio, see our FREE research report to learn more.

Guardant Health (GH)

Market Cap: $12.14 billion

Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ:GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.

Why Are We Hesitant About GH?

1. Subscale operations are evident in its revenue base of $982 million, meaning it has fewer distribution channels than its larger rivals (but more room for growth)
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes

Guardant Health’s stock price of $92.61 implies a valuation ratio of 9.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GH.

One Stock to Watch:

1st Source (SRCE)

Market Cap: $1.66 billion

Tracing its roots back to 1863 during the Civil War era, 1st Source Corporation (NASDAQ:SRCE) is a regional bank holding company that provides commercial, consumer, specialty finance, and wealth management services across Indiana, Michigan, and Florida.

Why Are We Positive On SRCE?

1. Net interest margin jumped by 55.7 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more resources to pursue growth initiatives
2. Share repurchases over the last five years enabled its annual earnings per share growth of 15.2% to outpace its revenue gains
3. Annual tangible book value per share growth of 9.1% over the last five years was superb and indicates its capital strength increased during this cycle

1st Source is trading at $68.17 per share, or 1.2x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.