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 is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
Opendoor (OPEN)
Market Cap: $2.72 billion
Founded by real estate guru Eric Wu, Opendoor (NASDAQ:OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.
Why Is OPEN Risky?
- Number of homes sold has disappointed over the past two years, indicating weak demand for its offerings
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.4% for the last two years
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Opendoor’s stock price of $2.81 implies a valuation ratio of 93.8x forward EV-to-EBITDA. To fully understand why you should be careful with OPEN, check out our full research report (it’s free).
First Bancorp (FBNC)
Market Cap: $2.68 billion
Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ:FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.
Why Are We Wary of FBNC?
- Annual revenue growth of 9.8% over the last five years was below our standards for the banking sector
- Performance over the past five years shows its incremental sales were less profitable, as its 4.4% annual earnings per share growth trailed its revenue gains
- Low return on equity reflects management’s struggle to allocate funds effectively
At $64.67 per share, First Bancorp trades at 1.5x forward P/B. Read our free research report to see why you should think twice about including FBNC in your portfolio.
One Stock to Watch:
Interface (TILE)
Market Cap: $1.96 billion
Pioneering carbon-neutral flooring since its founding in 1973, Interface (NASDAQ:TILE) is a global manufacturer of modular carpet tiles, luxury vinyl tile (LVT), and rubber flooring that specializes in carbon-neutral and sustainable flooring solutions.
Why Are We Positive on TILE?
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 34.1% annually, topping its revenue gains
- Free cash flow margin expanded by 7.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Interface is trading at $34.10 per share, or 1.4x trailing 12-month price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.