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. That said, here are three S&P 500 stocks to avoid and some better alternatives instead.
Dollar Tree (DLTR)
Market Cap: $18.53 billion
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ: DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Does DLTR Give Us Pause?
- Sizable revenue base leads to growth challenges as its 3.2% annual revenue increases over the last five years fell short of other consumer retail companies
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 31.3%
- Underwhelming 9.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
Dollar Tree’s stock price of $88.70 implies a valuation ratio of 14.9x forward P/E. Check out our free in-depth research report to learn more about why DLTR doesn’t pass our bar.
Huntington Ingalls (HII)
Market Cap: $8.82 billion
Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.
Why Should You Sell HII?
- Backlog growth averaged a weak 1.8% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
- Free cash flow margin shrank by 9.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Huntington Ingalls is trading at $224.88 per share, or 15.9x forward P/E. To fully understand why you should be careful with HII, check out our full research report (it’s free).
Cisco (CSCO)
Market Cap: $249.9 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Are We Wary of CSCO?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Free cash flow margin shrank by 5.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
At $63.03 per share, Cisco trades at 16.2x forward P/E. Read our free research report to see why you should think twice about including CSCO in your portfolio.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
