3 Russell 2000 Stocks We Find Risky

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.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.

Oxford Industries (OXM)

Market Cap: $578.1 million

The parent company of Tommy Bahama, Oxford Industries (NYSE:OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.

Why Should You Dump OXM?

1. Muted 12.6% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
2. Low free cash flow margin of 3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $38.27 per share, Oxford Industries trades at 15.7x forward P/E. To fully understand why you should be careful with OXM, check out our full research report (it’s free).

Driven Brands (DRVN)

Market Cap: $1.70 billion

With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.

Why Do We Think Twice About DRVN?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Negative free cash flow raises questions about the return timeline for its investments
3. Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging

Driven Brands’s stock price of $10.56 implies a valuation ratio of 8.4x forward P/E. Check out our free in-depth research report to learn more about why DRVN doesn’t pass our bar.

PROG (PRG)

Market Cap: $1.29 billion

Evolving from its origins as Aaron's, Inc. before rebranding in 2020, PROG Holdings (NYSE:PRG) provides alternative payment solutions including lease-to-own options and second-look credit products for consumers who may not qualify for traditional financing.

Why Do We Think PRG Will Underperform?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle
2. Sales over the last five years were less profitable as its earnings per share fell by 5.7% annually while its revenue was flat
3. Muted 3.8% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its financials peers

PROG is trading at $32.63 per share, or 7.7x forward P/E. Dive into our free research report to see why there are better opportunities than PRG.

Stocks We Like More

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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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.