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.
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.
Starbucks (SBUX)
Market Cap: $94.07 billion
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Are We Wary of SBUX?
- 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% for the last five years
- Efficiency has decreased over the last year as its operating margin fell by 2.7 percentage points
- 3.9 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
At $81.60 per share, Starbucks trades at 25.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why SBUX doesn’t pass our bar.
Norwegian Cruise Line (NCLH)
Market Cap: $7.54 billion
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE:NCLH) is a premier global cruise company.
Why Are We Out on NCLH?
- Sluggish trends in its passenger cruise days suggest customers aren’t adopting its solutions as quickly as the company hoped
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 18.7% annually while its revenue grew
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Norwegian Cruise Line’s stock price of $17.10 implies a valuation ratio of 8.2x forward price-to-earnings. Read our free research report to see why you should think twice about including NCLH in your portfolio.
United Airlines (UAL)
Market Cap: $22.22 billion
Founded in 1926, United Airlines Holdings (NASDAQ:UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.
Why Should You Dump UAL?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Free cash flow margin is forecasted to shrink by 6.8 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Low returns on capital reflect management’s struggle to allocate funds effectively
United Airlines is trading at $67.41 per share, or 6.4x forward price-to-earnings. If you’re considering UAL for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.