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. Keeping that in mind here are three Russell 2000 stocks that don’t make the cut and some better choices instead.Alarm.com (ALRM)Market Cap: $2.71 billionFounded in 2000 as a business unit within MicroStrategy Alarm.com (NASDAQ:ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.Why Does ALRM Give Us Pause?Products pricing or go-to-market strategy may need some adjustments as its 6.5% average billings growth over the last year was weak Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its three-year trend Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 65.3%Alarm.com’s stock price of $53.42 implies a valuation ratio of 3.3x forward price-to-sales. Check out our free in-depth research report to learn more about why ALRM doesn’t pass our bar.Sweetgreen (SG)Market Cap: $2.45 billionFounded in 2007 by three Georgetown University alum Sweetgreen (NYSE:SG) is a casual quick service chain known for its healthy salads and bowls.Why Are We Hesitant About SG?Suboptimal cost structure is highlighted by its history of operating losses

Cash-burning tendencies make us wonder if it can sustainably generate shareholder value Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilutionAt $20.76 per share Sweetgreen trades at 69.1x forward EV-to-EBITDA. To fully understand why you should be careful with SG check out our full research report (it’s free).American Woodmark (AMWD)Market Cap: $897.3 millionStarting as a small millwork shop American Woodmark (NASDAQ:AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.Why Do We Steer Clear of AMWD?