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3 Russell 2000 Stocks That Fall Short
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 are three Russell 2000 stocks that don’t make the cut and some better choices instead.
nCino (NCNO)
Market Cap: $2.09 billion
Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ:NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.
Why Do We Think Twice About NCNO?
- Average billings growth of 9.6% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 7.9% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 62.2% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $19.73 per share, nCino trades at 3.1x forward price-to-sales. Read our free research report to see why you should think twice about including NCNO in your portfolio.
The Marzetti Company (MZTI)
Market Cap: $2.71 billion
Known for its frozen garlic bread and Parkerhouse rolls, The Marzetti Company (NASDAQ:MZTI) sells bread, dressing, and dips to the retail and food service channels.
Why Does MZTI Fall Short?
- Lackluster 1.6% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Subscale operations are evident in its revenue base of $1.91 billion, meaning it has fewer distribution channels than its larger rivals
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 23.9%
The Marzetti Company’s stock price of $99.24 implies a valuation ratio of 15.2x forward P/E. Check out our free in-depth research report to learn more about why MZTI doesn’t pass our bar.
1-800-FLOWERS (FLWS)
Market Cap: $173.3 million
Founded in 1976, 1-800-FLOWERS (NASDAQ:FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.
Why Do We Steer Clear of FLWS?
- Annual revenue declines of 6.7% over the last five years indicate problems with its market positioning
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
1-800-FLOWERS is trading at $2.70 per share, or 29.8x forward EV-to-EBITDA. If you’re considering FLWS for your portfolio, see our FREE research report to learn more.
Stocks We Like More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.