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.
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 avoid and better alternatives to consider.
3D Systems (DDD)
Market Cap: $278.1 million
Founded by the inventor of stereolithography, 3D Systems (NYSE:DDD) engineers, manufactures, and sells 3D printers and other related products to the aerospace, automotive, healthcare, and consumer goods industries.
Why Do We Avoid DDD?
- Sales tumbled by 6.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $2.17 per share, 3D Systems trades at 0.7x forward price-to-sales. To fully understand why you should be careful with DDD, check out our full research report (it’s free for active Edge members).
Privia Health (PRVA)
Market Cap: $2.88 billion
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Is PRVA Not Exciting?
- Revenue base of $2.04 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Poor free cash flow margin of 4.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Push for growth has led to negative returns on capital, signaling value destruction
Privia Health is trading at $23.72 per share, or 25.3x forward P/E. If you’re considering PRVA for your portfolio, see our FREE research report to learn more.
Texas Capital Bank (TCBI)
Market Cap: $3.92 billion
Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ:TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.
Why Are We Wary of TCBI?
- Annual net interest income growth of 2.1% over the last five years was below our standards for the banking sector
- Anticipated net interest income growth of 6% for the next year implies demand will be shaky
- Weak unit economics are reflected in its net interest margin of 3.2%, one of the worst among bank companies
Texas Capital Bank’s stock price of $85.85 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why TCBI doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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).
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