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. That said, here are two Russell 2000 stocks that could be the next big thing and one best left off your watchlist.
One Stock to Sell:
ThredUp (TDUP)
Market Cap: $426.8 million
Founded to revolutionize thrifting, ThredUp (NASDAQ:TDUP) is a leading online fashion resale marketplace offering a wide selection of gently-used clothing and accessories.
Why Is TDUP Risky?
- Number of orders has disappointed over the past two years, indicating weak demand for its offerings
- Poor expense management has led to operating margin losses
- Low free cash flow margin of -0.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $3.39 per share, ThredUp trades at 20.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TDUP doesn’t pass our bar.
Two Stocks to Watch:
Moelis (MC)
Market Cap: $4.13 billion
Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE:MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.
Why Does MC Catch Our Eye?
- Annual revenue growth of 33.6% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 311% over the last two years outstripped its revenue performance
- Industry-leading 40.7% return on equity demonstrates management’s skill in finding high-return investments
Moelis’s stock price of $56.27 implies a valuation ratio of 16.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Vitesse Energy (VTS)
Market Cap: $719.6 million
Taking a hands-off approach to energy production, Vitesse Energy (NYSE:VTS) owns non-operated stakes in oil and natural gas wells primarily in North Dakota and Montana’s Williston Basin.
Why Is VTS Interesting?
- Products and services resonate with customers, evidenced by its respectable 10.3% annualized sales growth over the last four years
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 79.8%
- Robust free cash flow margin of 25.6% gives it many options for capital deployment
Vitesse Energy is trading at $18.09 per share, or 54.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
