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.
Even among blue-chip stocks, not all investments are created equal – which is why we built StockStory to help you navigate the market. That said, here is one S&P 500 stock that could deliver good returns and two best left off your watchlist.
Market Cap: $13.34 billion
Founded as Kum Kleen Products, Avery Dennison (NYSE:AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.
Why Does AVY Give Us Pause?
Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
Free cash flow margin shrank by 3.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Diminishing returns on capital suggest its earlier profit pools are drying up
Avery Dennison’s stock price of $171.08 implies a valuation ratio of 16.6x forward P/E. If you’re considering AVY for your portfolio, see our FREE research report to learn more.
Market Cap: $23.99 billion
Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial (NASDAQ:CINF) provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.
Why Does CINF Fall Short?
Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.8% for the last five years
Expenses have increased as a percentage of revenue over the last four years as its combined ratio degraded by 8.4 percentage points
Estimated book value per share growth of 2.8% for the next 12 months implies profitability will slow from its two-year trend
At $153.40 per share, Cincinnati Financial trades at 1.7x forward P/B. To fully understand why you should be careful with CINF, check out our full research report (it’s free).
Market Cap: $2.56 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.
