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 are two Russell 2000 stocks that could be the next big thing and one best left off your watchlist.
One Stock to Sell:
Compass (COMP)
Market Cap: $5.22 billion
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE:COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Do We Think Twice About COMP?
- Poor expense management has led to operating margin losses
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Compass is trading at $9.31 per share, or 16.2x forward P/E. Dive into our free research report to see why there are better opportunities than COMP.
Two Stocks to Watch:
Monarch (MCRI)
Market Cap: $1.73 billion
Established in 1993, Monarch (NASDAQ:MCRI) operates luxury casinos and resorts, offering high-end gaming, dining, and hospitality experiences.
Why Could MCRI Be a Winner?
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 21.1%
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 40% annually, topping its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $94.95 per share, Monarch trades at 16.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
LSI (LYTS)
Market Cap: $519.5 million
Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.
Why Does LYTS Stand Out?
- Market share has increased this cycle as its 15.6% annual revenue growth over the last five years was exceptional
- Operating margin expanded by 2.8 percentage points over the last five years as it scaled and became more efficient
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 50.7% annually
LSI’s stock price of $17.33 implies a valuation ratio of 14.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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