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. Keeping that in mind, here are three S&P 500 stocks to steer clear of and a few alternatives to consider.
United Airlines (UAL)
Market Cap: $37.56 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 Sell UAL?
- Sluggish trends in its revenue passenger miles suggest customers aren’t adopting its solutions as quickly as the company hoped
- Operating margin is forecasted to remain flat over the next year
- Projected 5.4 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
United Airlines’s stock price of $116.02 implies a valuation ratio of 9.3x forward P/E. If you’re considering UAL for your portfolio, see our FREE research report to learn more.
GE HealthCare (GEHC)
Market Cap: $38.24 billion
Spun off from industrial giant General Electric in 2023 after over a century as its healthcare division, GE HealthCare (NASDAQ: GEHC) provides medical imaging equipment, patient monitoring systems, diagnostic pharmaceuticals, and AI-enabled healthcare solutions to hospitals and clinics worldwide.
Why Does GEHC Worry Us?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share fell by 3.8% annually over the last four years while its revenue grew, showing its incremental sales were much less profitable
- 7.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
GE HealthCare is trading at $83.93 per share, or 17.2x forward P/E. Check out our free in-depth research report to learn more about why GEHC doesn’t pass our bar.
PNC Financial Services Group (PNC)
Market Cap: $83.49 billion
Tracing its roots back to 1852 when Pittsburgh's industrial boom demanded stronger financial institutions, PNC (NYSE: PNC) is a diversified financial institution that provides retail banking, corporate banking, and asset management services through a coast-to-coast branch network.
Why Are We Hesitant About PNC?
- Annual sales growth of 1.3% over the last two years lagged behind its banking peers as its large revenue base made it difficult to generate incremental demand
- Annual net interest income growth of 7.2% over the last five years lagged behind its banking peers as its large revenue base made it difficult to generate incremental demand
- Weak unit economics are reflected in its net interest margin of 2.7%, one of the worst among bank companies
At $213.58 per share, PNC Financial Services Group trades at 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than PNC.
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