Are Small-Cap Stocks A Buy After Russell 2000 Correction?

Amid an especially volatile start to 2025, small-cap stocks have struggled. Are they now a buy at depressed valuations?

Russell 2000: The Russell 2000, as reflected by the iShares Russell 2000 ETF IWM, has dropped nearly 15% since December 2024. This constitutes a market correction.

The Trump Administration has embraced domestic and foreign policies that Former Treasury Secretary Larry Summers labels as inflationary. Higher prices could lead to higher interest rates, which disproportionately affect smaller companies with floating-rate debt.

The Russell index contains 2,000 companies with an average market cap of around $1 billion. Higher-weighted components are likely to have outperformed the rest of the index and are not necessarily representative of the entire Russell 2000. Still, they provide a glimpse into how investors are valuing small-cap companies.

Here’s how the top stocks in the IWM have performed since the ETF’s correction began in December 2024:

Sprouts Farmers Market, Inc. SFM

Dec. 2, 2024, Price: $150.92
March 6, 2025, Price: $138.11
Percentage Change: -8.49%

Insmed Incorporated INSM

Dec. 2, 2024, Price: $72.42
March 6, 2025, Price: $75.02
Percentage Change: +3.59%

Vaxcyte, Inc. PCVX

Dec. 2, 2024, Price: $91.60
March 6, 2025, Price: $74.81
Percentage Change: -18.33%

SouthState Corporation SSB

Dec. 2, 2024, Price: $109.35
March 6, 2025, Price: $92.37
Percentage Change: -15.53%

FTAI Aviation Ltd. FTAI

Dec. 2, 2024, Price: $166.8
March 6, 2025, Price: $108.28
Percentage Change: -35.08%

Rocket Lab USA, Inc. RKLB

Dec. 2, 2024, Price: $24.16
March 6, 2025, Price: $18.66
Percentage Change: -22.76%

Applied Industrial Technologies, Inc. AIT

Dec. 2, 2024, Price: $272.91
March 6, 2025, Price: $229.00
Percentage Change: -16.09%

Credo Technology Group Holding Ltd CRDO

Dec. 2, 2024, Price: $47.80
March 6, 2025, Price: $42.07
Percentage Change: -11.99%

Ufp Industries Inc. UFPI and Fluor Corp. FLR are also among the ETF’s top holdings.

Benzinga Edge evaluates stocks on a valuation, momentum and growth basis.

UFP, a holding company based in Grand Rapids, Michigan, performs well under the value criterion, scoring 78.64 out of 100. However, the stock does not have momentum, scoring 32.82. It is also not the fastest-growing company, grading 33.35. The stock is down 20.5% since Dec. 2, 2024.

Fluor, an engineering and construction firm, rates high according to its intrinsic value, scoring at 93.6. Still, recent price action indicates its growth and momentum prospects are not high, scoring 15.32 and 29.26, respectively. The stock is down 33.6% since Dec. 2, 2024.

Unlock the rest of the BZ Edge Rankings and see how another small-cap stock stacks up.

S&P 500 Comparison: The SPDR S&P 500 ETF Trust SPY, which tracks 500 of the largest U.S. companies, has fared slightly better than the Russell 2000. The index is down around 2% since Dec. 2, 2024.

On an earnings basis, investors are trading the S&P 500 at a much higher multiple than the Russell 2000. The S&P as a whole is trading 21.63 times above earnings compared to the small-cap index’s 14.84 times.

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