1 Russell 2000 Stock on Our Buy List and 2 We Brush Off

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

Two Stocks to Sell:

SunOpta (STKL)

Market Cap: $764.6 million

Committed to clean-label foods, SunOpta (NASDAQ:STKL) is a sustainability-focused food and beverage company specializing in the sourcing, processing, and packaging of organic products.

Why Should You Dump STKL?

1. Products have few die-hard fans as sales have declined by 1.6% annually over the last three years
2. Smaller revenue base of $792.4 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Gross margin of 15.5% is below its competitors, leaving less money to invest in areas like marketing and production facilities

At $6.47 per share, SunOpta trades at 36.4x forward P/E. Check out our free in-depth research report to learn more about why STKL doesn’t pass our bar.

Champion Homes (SKY)

Market Cap: $4.41 billion

Founded in 1951, Champion Homes (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.

Why Does SKY Fall Short?

1. Disappointing unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
3. Eroding returns on capital suggest its historical profit centers are aging

Champion Homes is trading at $79.89 per share, or 22.9x forward P/E. If you’re considering SKY for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Sterling (STRL)

Market Cap: $12.61 billion

Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.

Why Is STRL a Top Pick?

1. Annual revenue growth of 12.4% over the past two years was outstanding, reflecting market share gains this cycle
2. STRL is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its rising cash conversion increases its margin of safety
3. Rising returns on capital show management is finding more attractive investment opportunities

Sterling’s stock price of $405.50 implies a valuation ratio of 29.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

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.