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. That said, here is one S&P 500 stock that is positioned to outperform and two that could be in trouble.
Two Stocks to Sell:
Fastenal (FAST)
Market Cap: $45.03 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 Does FAST Give Us Pause?
- 3.3% annual revenue growth over the last two years was slower than its industrials peers
- Incremental sales over the last two years were less profitable as its 1.7% annual earnings per share growth lagged its revenue gains
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6 percentage points
Fastenal is trading at $80.05 per share, or 35.7x forward P/E. If you’re considering FAST for your portfolio, see our FREE research report to learn more.
Vertex Pharmaceuticals (VRTX)
Market Cap: $115.7 billion
Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ: VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.
Why Does VRTX Fall Short?
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 15.6% annually
- Free cash flow margin dropped by 58.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Waning returns on capital imply its previous profit engines are losing steam
At $453 per share, Vertex Pharmaceuticals trades at 24.3x forward P/E. Dive into our free research report to see why there are better opportunities than VRTX.
One Stock to Buy:
Copart (CPRT)
Market Cap: $58.74 billion
Starting as a single salvage yard in California in 1982, Copart (NASDAQ: CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.
Why Should You Buy CPRT?
- Annual revenue growth of 15.2% over the last five years was superb and indicates its market share increased during this cycle
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 18.3% annually, topping its revenue gains
- Strong free cash flow margin of 21.8% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
Copart’s stock price of $61.13 implies a valuation ratio of 36.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
