The S&P 500 (^GSPC) is home to the biggest and most well-known companies in the market, making it a go-to index for investors seeking stability. But not all large-cap stocks are created equal - some are struggling with slowing growth, declining margins, or increased competition.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here is one S&P 500 stock that could deliver good returns and two that could be in trouble.
Two Stocks to Sell:
Darden (DRI)
Market Cap: $22.44 billion
Founded in 1968 as Red Lobster, Darden (NYSE: DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Does DRI Fall Short?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.1% over the last seven years was below our standards for the restaurant sector
- Lacking pricing power results in an inferior gross margin of 21.8% that must be offset by turning more tables
- Earnings growth underperformed the sector average over the last seven years as its EPS grew by just 9% annually
Darden’s stock price of $195.38 implies a valuation ratio of 17.1x forward P/E. Read our free research report to see why you should think twice about including DRI in your portfolio.
Tesla (TSLA)
Market Cap: $1.59 trillion
Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.
Why Do We Pass on TSLA?
- Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
- The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
- On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.
At $418.65 per share, Tesla trades at 206.1x forward price-to-earnings. If you’re considering TSLA for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
McDonald's (MCD)
Market Cap: $196.4 billion
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Could MCD Be a Winner?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Highly-profitable franchise model results in strong unit economics and a best-in-class gross margin of 57.1%
- MCD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
McDonald's is trading at $276.70 per share, or 20.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
