While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. Keeping that in mind, here are three S&P 500 stocks that don’t make the cut and some better choices instead.
Deckers (DECK)
Market Cap: $14.21 billion
Established in 1973, Deckers (NYSE: DECK) is a footwear and apparel conglomerate with a portfolio of lifestyle and performance brands.
Why Is DECK Risky?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Poor expense management has led to an operating margin of 23.7% that is below the industry average
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 18.8% for the last two years
Deckers’s stock price of $100.15 implies a valuation ratio of 13.2x forward P/E. Read our free research report to see why you should think twice about including DECK in your portfolio.
Fastenal (FAST)
Market Cap: $53.28 billion
Founded in 1967, Fastenal (NASDAQ: FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.
Why Is FAST Not Exciting?
- Muted 5.7% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Earnings per share lagged its peers over the last two years as they only grew by 4.4% annually
Fastenal is trading at $46.56 per share, or 36.6x forward P/E. Dive into our free research report to see why there are better opportunities than FAST.
GE Vernova (GEV)
Market Cap: $235.3 billion
Born from the energy business of industrial giant General Electric in a 2023 spin-off, GE Vernova (NYSE: GEV) designs, manufactures, and services power generation equipment and grid technologies to help customers build more reliable and sustainable electric systems.
Why Are We Wary of GEV?
- The company has faced growth challenges as its 3.6% annual revenue increases over the last four years fell short of other industrials companies
- High input costs result in an inferior gross margin of 16.2% that must be offset through higher volumes
- Suboptimal cost structure is highlighted by its history of operating margin losses
At $877.00 per share, GE Vernova trades at 57.3x forward P/E. To fully understand why you should be careful with GEV, check out our full research report (it’s free).
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