The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.

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 to steer clear of and some alternatives to watch instead.

Stitch Fix (SFIX)

Market Cap: $644.2 million

One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.

Why Do We Avoid SFIX?

1. Demand for its offerings was relatively low as its number of active clients has underwhelmed
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.5% for the last two years
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Stitch Fix’s stock price of $4.80 implies a valuation ratio of 0.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than SFIX.

Acushnet (GOLF)

Market Cap: $5.69 billion

Producer of the acclaimed Titleist Pro V1 golf ball, Acushnet (NYSE: GOLF) is a design and manufacturing company specializing in performance-driven golf products.

Why Is GOLF Risky?

1. Muted 10.1% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $96.96 per share, Acushnet trades at 24.2x forward P/E. Check out our free in-depth research report to learn more about why GOLF doesn’t pass our bar.

Scholastic (SCHL)

Market Cap: $889.7 million

Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ: SCHL) is an international company specializing in children's publishing, education, and media services.

Why Do We Steer Clear of SCHL?

1. Lackluster 4.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Poor free cash flow margin of 1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Scholastic is trading at $35.01 per share, or 25x forward P/E. To fully understand why you should be careful with SCHL, check out our full research report (it’s free).

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.