2 Russell 2000 Stocks to Consider Right Now and 1 We Find Risky

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.

The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here are two Russell 2000 stocks that could be the next breakout winners and one that may face some trouble.

One Stock to Sell:

Kennametal (KMT)

Market Cap: $2.96 billion

Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE:KMT) is a provider of industrial materials and tools for various sectors.

Why Is KMT Risky?

1. Annual sales declines of 1.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.9% annually

Kennametal’s stock price of $38.85 implies a valuation ratio of 13.7x forward P/E. Read our free research report to see why you should think twice about including KMT in your portfolio.

Two Stocks to Watch:

VSE Corporation (VSEC)

Market Cap: $6.11 billion

With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ:VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.

Why Should VSEC Be on Your Watchlist?

1. Annual revenue growth of 13.7% over the past two years was outstanding, reflecting market share gains this cycle
2. Market share is on track to rise over the next 12 months as its 43.9% projected revenue growth implies demand will accelerate from its two-year trend
3. Operating margin expanded by 5.2 percentage points over the last five years as it scaled and became more efficient

VSE Corporation is trading at $217.71 per share, or 48.5x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Crescent Energy (CRGY)

Market Cap: $4.18 billion

Controlling over 1.4 million net acres across proven U.S. basins, Crescent Energy (NYSE:CRGY) extracts oil and natural gas from underground reservoirs in Texas and the Rocky Mountains.

Why Are We Bullish on CRGY?

1. Market share has increased this cycle as its 46.3% annual revenue growth over the last five years was exceptional
2. Excellent production efficiency leads to a stellar gross margin of 58.5%
3. Robust free cash flow margin of 15.8% gives it many options for capital deployment

At $12.70 per share, Crescent Energy trades at 6.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

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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.