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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. 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:

Hertz (HTZ)

Market Cap: $1.95 billion

Started with a dozen Model T Fords, Hertz (NASDAQ:HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.

Why Do We Pass on HTZ?

1. Weak unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy

2. Eroding returns on capital suggest its historical profit centers are aging

3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Hertz is trading at $6.30 per share, or 5.3x forward EV-to-EBITDA. If you’re considering HTZ for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

The Ensign Group (ENSG)

Market Cap: $8.39 billion

Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ:ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.

Why Could ENSG Be a Winner?

1. Unit sales averaged 13.2% growth over the past two years and imply healthy demand for its products

2. Estimated revenue growth of 14.3% for the next 12 months implies its momentum over the last two years will continue

3. Earnings per share grew by 18.4% annually over the last five years and trumped its peers

The Ensign Group’s stock price of $147.04 implies a valuation ratio of 22.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

Integral Ad Science (IAS)

Market Cap: $1.33 billion

Founded in 2009, Integral Ad Science (NASDAQ:IAS) provides digital advertising verification and optimization solutions, ensuring that ads are viewable by real people in brand-safe environments across various platforms and devices.

Why Do We Like IAS?

1. Software platform has product-market fit given the rapid recovery of its customer acquisition costs

2. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient

3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends