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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.
Two Stocks to Sell:
Telephone and Data Systems (TDS)
Market Cap: $4.6 billion
Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE: TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.
Why Should You Dump TDS?
- Sales tumbled by 1.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 21.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- 20× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Telephone and Data Systems is trading at $40.76 per share, or 3.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than TDS.
Brink's (BCO)
Market Cap: $4.67 billion
Known for its iconic armored trucks that have been a fixture in American cities since 1859, Brink's (NYSE: BCO) provides secure transportation and management of cash and valuables for banks, retailers, and other businesses worldwide.
Why Are We Wary of BCO?
- Muted 3.5% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 1.1 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $112.04 per share, Brink's trades at 14x forward P/E. To fully understand why you should be careful with BCO, check out our full research report (it’s free).
One Stock to Buy:
EVERTEC (EVTC)
Market Cap: $2.28 billion
Operating one of Latin America's leading PIN debit networks called ATH, EVERTEC (NYSE: EVTC) is a payment transaction processor and financial technology provider that enables merchants and financial institutions across Latin America and the Caribbean to accept and process electronic payments.
Why Do We Love EVTC?
- Annual revenue growth of 18.2% over the past two years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been more profitable as its earnings per share increased by 19.4% annually, topping its revenue gains
- Industry-leading 32.2% return on equity demonstrates management’s skill in finding high-return investments
EVERTEC’s stock price of $35.68 implies a valuation ratio of 10.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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