While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. That said, here are three S&P 500 stocks that don’t make the cut and some better choices instead.
Masco (MAS)
Market Cap: $15.29 billion
Headquartered just outside of Detroit, MI, Masco (NYSE: MAS) designs and manufactures home-building products such as glass shower doors, decorative lighting, bathtubs, and faucets.
Why Do We Avoid MAS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Anticipated sales growth of 1.3% for the next year implies demand will be shaky
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $73.88 per share, Masco trades at 19.7x forward P/E. To fully understand why you should be careful with MAS, check out our full research report (it’s free).
Corning (GLW)
Market Cap: $55.34 billion
Supplying windows for some of the United States’s earliest spacecraft, Corning (NYSE: GLW) provides glass and other electronic components for the consumer electronics, telecommunications, automotive, and healthcare industries.
Why Are We Wary of GLW?
- Sizable revenue base leads to growth challenges as its 4% annual revenue increases over the last two years fell short of other industrials companies
- 4.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Corning’s stock price of $64.60 implies a valuation ratio of 25.9x forward P/E. Read our free research report to see why you should think twice about including GLW in your portfolio.
GE HealthCare (GEHC)
Market Cap: $33.73 billion
Spun off from industrial giant General Electric in 2023 after over a century as its healthcare division, GE HealthCare (NASDAQ: GEHC) provides medical imaging equipment, patient monitoring systems, diagnostic pharmaceuticals, and AI-enabled healthcare solutions to hospitals and clinics worldwide.
Why Does GEHC Worry Us?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Performance over the past four years shows its incremental sales were much less profitable, as its earnings per share fell by 3.7% annually
- Free cash flow margin dropped by 9.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
GE HealthCare is trading at $74 per share, or 17.9x forward P/E. If you’re considering GEHC for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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