Megacap stocks dominate their sectors and their actions influence economies worldwide. The flip side though is that their sheer size means they have less room for explosive growth as scale works against them.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory – to help you find high-quality companies that can grow their earnings no matter what. Keeping that in mind, here is one industry titan whose competitive advantages create flywheel effects and two whose existing offerings may be tapped out.
Two Mega-Cap Stocks to Sell:
Procter & Gamble (PG)
Market Cap: $345.4 billion
Founded by candle maker William Procter and soap maker James Gamble, Procter & Gamble (NYSE:PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.
Why Are We Wary of PG?
Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
Anticipated sales growth of 2.7% for the next year implies demand will be shaky
Free cash flow margin didn’t grow over the last year
At $146.79 per share, Procter & Gamble trades at 21.5x forward P/E. Read our free research report to see why you should think twice about including PG in your portfolio, it’s free.
Morgan Stanley (MS)
Market Cap: $335.4 billion
Founded in 1924 during the post-WWI economic boom by former JP Morgan partners, Morgan Stanley (NYSE:MS) is a global financial services firm that provides investment banking, wealth management, and investment management services to corporations, governments, institutions, and individuals.
Why Does MS Fall Short?
Annual sales growth of 6.1% over the last five years lagged behind its financials peers as its large revenue base made it difficult to generate incremental demand
Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 7.3% annually
Large asset base makes it harder to grow tangible book value per share quickly, and its annual tangible book value per share growth of 5.8% over the last five years was below our standards for the financials sector
Morgan Stanley is trading at $222.49 per share, or 18.2x forward P/E. Dive into our free research report to see why there are better opportunities than MS.
One Mega-Cap Stock to Buy:
Alphabet (GOOGL)
Market Cap: $4.36 trillion
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
