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.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. That said, here is one S&P 500 stock that is leading the market forward and two that could be in trouble.
Two Stocks to Sell:
Constellation Brands (STZ)
Market Cap: $24.54 billion
With a presence in more than 100 countries, Constellation Brands (NYSE: STZ) is a globally renowned producer and marketer of beer, wine, and spirits.
Why Are We Hesitant About STZ?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.8%
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 3.3% annually
Constellation Brands’s stock price of $136.22 implies a valuation ratio of 11.6x forward P/E. To fully understand why you should be careful with STZ, check out our full research report (it’s free).
Charter (CHTR)
Market Cap: $17.11 billion
Operating as Spectrum, Charter (NASDAQ: CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.
Why Should You Dump CHTR?
- Performance surrounding its internet subscribers has lagged its peers
- Free cash flow margin is forecasted to grow by 2 percentage points in the coming year, potentially giving the company more chips to play with
- ROIC hasn’t moved, making investors question whether its recent investments can increase profitability
At $140.50 per share, Charter trades at 3.2x forward P/E. Dive into our free research report to see why there are better opportunities than CHTR.
One Stock to Watch:
Johnson Controls (JCI)
Market Cap: $87.86 billion
Founded after patenting the electric room thermostat, Johnson Controls (NYSE: JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.
Why Are We Fans of JCI?
- Adequate gross margin of 32.9% gives it sufficient room to spend on marketing and product development
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin expanded by 6.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Johnson Controls is trading at $144.87 per share, or 27.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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