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.
Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. That said, here are three S&P 500 stocks that don’t make the cut and some better choices instead.
NXP Semiconductors (NXPI)
Market Cap: $56.89 billion
Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.
Why Do We Think Twice About NXPI?
- Sales tumbled by 4.1% annually over the last two years, showing market trends are working against its favor during this cycle
- Projected sales growth of 5.3% for the next 12 months suggests sluggish demand
- Free cash flow margin dropped by 8.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
NXP Semiconductors’s stock price of $223.51 implies a valuation ratio of 17.6x forward P/E. Check out our free in-depth research report to learn more about why NXPI doesn’t pass our bar.
Mondelez (MDLZ)
Market Cap: $79.78 billion
Founded as Nabisco in 1903, Mondelez (NASDAQ: MDLZ) is a packaged snacks powerhouse best known for its Oreo, Cadbury, Toblerone, Ritz, and Trident brands.
Why Is MDLZ Not Exciting?
- Flat unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 4.7 percentage points
- Free cash flow margin dropped by 2.3 percentage points over the last year, implying the company became more capital intensive as competition picked up
Mondelez is trading at $61.53 per share, or 19.4x forward P/E. If you’re considering MDLZ for your portfolio, see our FREE research report to learn more.
Paramount (PSKY)
Market Cap: $20.28 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ: PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Is PSKY Risky?
- Products and services have few die-hard fans as sales have declined by 2% annually over the last two years
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 15% annually while its revenue grew
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $18.45 per share, Paramount trades at 18.7x forward P/E. Dive into our free research report to see why there are better opportunities than PSKY.
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