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. Keeping that in mind, here are three Russell 2000 stocks to avoid and better alternatives to consider.
Orion (ORN)
Market Cap: $551.3 million
Established in 1994, Orion (NYSE:ORN) provides construction services for marine infrastructure and industrial projects.
Why Do We Think Twice About ORN?
- Sales trends were unexciting over the last five years as its 4.8% annual growth was below the typical industrials company
- Earnings per share fell by 7.6% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -1% for the last five years
At $13.59 per share, Orion trades at 24.5x forward P/E. Read our free research report to see why you should think twice about including ORN in your portfolio.
AMN Healthcare Services (AMN)
Market Cap: $791.3 million
With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE:AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.
Why Is AMN Risky?
- Sales tumbled by 15.1% annually over the last two years, showing market trends are working against its favor during this cycle
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
AMN Healthcare Services’s stock price of $20.35 implies a valuation ratio of 10.4x forward P/E. Check out our free in-depth research report to learn more about why AMN doesn’t pass our bar.
QCR Holdings (QCRH)
Market Cap: $1.49 billion
With roots dating back to 1993 and a name reflecting its original Quad Cities market, QCR Holdings (NASDAQGM:QCRH) operates four community banks across Iowa and Missouri, providing commercial, consumer banking, and trust services to businesses and individuals.
Why Are We Hesitant About QCRH?
- Annual net interest income growth of 8.9% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 4.9% for the next 12 months implies demand will slow from its five-year trend
- Expenses have increased as a percentage of revenue over the last five years as its efficiency ratio degraded by 6.3 percentage points
QCR Holdings is trading at $90.44 per share, or 1.2x forward P/B. To fully understand why you should be careful with QCRH, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month - FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.