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 are two S&P 500 stocks positioned to outperform and one best left off your watchlist.
Market Cap: $174.6 billion
One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE:BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.
Why Does BA Give Us Pause?
Annual sales growth of 7.2% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
Persistent operating margin losses suggest the business manages its expenses poorly
Negative free cash flow raises questions about the return timeline for its investments
Boeing’s stock price of $221.95 implies a valuation ratio of 43.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including BA in your portfolio, it’s free.
Market Cap: $3.88 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 Are We Backing GOOGL?
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.
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.
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.
At $321.18 per share, Alphabet trades at 27.6x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Market Cap: $114.8 billion
Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Is VRT a Good Business?
Average organic revenue growth of 21.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
Free cash flow margin expanded by 16 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Improving returns on capital reflect management’s ability to monetize investments
