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. Keeping that in mind, here is one S&P 500 stock that is positioned to outperform and two best left off your watchlist.
Market Cap: $228.9 billion
With its cloud-based platform named after its stock ticker symbol CRM (Customer Relationship Management), Salesforce (NYSE:CRM) provides customer relationship management software that helps businesses connect with their customers across sales, service, marketing, and commerce.
Why Are We Cautious About CRM?
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ARR growth averaged a weak 9% over the last year, suggesting that competition is pulling some attention away from its software
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Estimated sales growth of 8.9% for the next 12 months is soft and implies weaker demand
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Operating margin improvement of 2.1 percentage points over the last year demonstrates its ability to scale efficiently
At $240.47 per share, Salesforce trades at 5.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than CRM.
Market Cap: $16.5 billion
Taking its name from the Latin root of “strong”, Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.
Why Do We Think FTV Will Underperform?
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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
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Earnings per share were flat over the last five years and fell short of the peer group average
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Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
Fortive’s stock price of $51.97 implies a valuation ratio of 18.2x forward P/E. If you’re considering FTV for your portfolio, see our FREE research report to learn more.
Market Cap: $3.36 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.
Why Is GOOGL a Top Pick?
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Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin.
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The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube.
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Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.
