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.
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 avoid and better alternatives to consider.
ZoomInfo (GTM)
Market Cap: $1.11 billion
Operating a platform it calls "RevOS" - short for Revenue Operating System - ZoomInfo (NASDAQ:GTM) provides sales, marketing, and recruiting teams with business intelligence and analytics to identify prospects and deliver targeted outreach.
Why Do We Avoid GTM?
- Offerings struggled to generate interest as its billings were flat over the last year
- Forecasted revenue decline of 6.2% for the upcoming 12 months implies demand will fall off a cliff
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 49.7 percentage points
At $3.80 per share, ZoomInfo trades at 0.9x forward price-to-sales. If you’re considering GTM for your portfolio, see our FREE research report to learn more.
iHeartMedia (IHRT)
Market Cap: $455.4 million
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Are We Out on IHRT?
- Lackluster 4.2% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Poor free cash flow margin of -0.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital on unfavorable terms if market conditions deteriorate
iHeartMedia is trading at $2.69 per share, or 7.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than IHRT.
Werner (WERN)
Market Cap: $2.24 billion
Conducting business in over a 100 countries, Werner (NASDAQ:WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.
Why Are We Bearish on WERN?
- 1.3% annual revenue growth over the last two years was slower than its industrials peers
- Earnings per share fell by 39.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Werner’s stock price of $37.28 implies a valuation ratio of 22.5x forward P/E. Check out our free in-depth research report to learn more about why WERN doesn’t pass our bar.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.