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 two S&P 500 stocks positioned to outperform and one that may struggle.
One Stock to Sell:
Cummins (CMI)
Market Cap: $55.09 billion
With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE: CMI) offers engines and power systems.
Why Are We Hesitant About CMI?
- 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 2.3% for the last two years
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.9 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $399.01 per share, Cummins trades at 19.6x forward P/E. Read our free research report to see why you should think twice about including CMI in your portfolio.
Two Stocks to Watch:
Nvidia (NVDA)
Market Cap: $4.06 trillion
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ: NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Is NVDA a Good Business?
- Annual revenue growth of 125% over the last two years was superb and indicates its market share increased during this cycle
- Share buybacks catapulted its annual earnings per share growth to 79.5%, which outperformed its revenue gains over the last five years
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
Nvidia’s stock price of $167.10 implies a valuation ratio of 30.6x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
United Rentals (URI)
Market Cap: $62.75 billion
Owning the largest rental fleet in the world, United Rentals (NYSE: URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
Why Are We Fans of URI?
- Impressive 11.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 25.8%, and it turbocharged its profits by achieving some fixed cost leverage
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
United Rentals is trading at $973.50 per share, or 22x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. 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 ServiceNow (+178% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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