The S&P 500 (^GSPC) is often seen as a benchmark for strong businesses, but that doesn’t mean every stock is worth owning. Some companies face significant challenges, whether it’s stagnating growth, heavy debt, or disruptive new competitors.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here is one S&P 500 stock that is leading the market forward and two that could be in trouble.
Two Stocks to Sell:
Lockheed Martin (LMT)
Market Cap: $144.3 billion
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Why Do We Think LMT Will Underperform?
- Annual sales growth of 2.8% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.6% annually
- Eroding returns on capital suggest its historical profit centers are aging
Lockheed Martin is trading at $629.25 per share, or 20.9x forward P/E. Read our free research report to see why you should think twice about including LMT in your portfolio.
Henry Schein (HSIC)
Market Cap: $8.45 billion
With a vast inventory of over 300,000 products stocked in distribution centers spanning more than 5.3 million square feet worldwide, Henry Schein (NASDAQ: HSIC) is a global distributor of healthcare products and services primarily to dental practices, medical offices, and other healthcare facilities.
Why Are We Wary of HSIC?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Estimated sales growth of 4.1% for the next 12 months is soft and implies weaker demand
- Eroding returns on capital suggest its historical profit centers are aging
Henry Schein’s stock price of $73.71 implies a valuation ratio of 14x forward P/E. Check out our free in-depth research report to learn more about why HSIC doesn’t pass our bar.
One Stock to Watch:
S&P Global (SPGI)
Market Cap: $123.2 billion
Tracing its roots back to 1860 when it published the first railroad industry manual, S&P Global (NYSE: SPGI) provides credit ratings, market intelligence, commodity data, automotive analytics, and financial indices that help investors and businesses make decisions.
Why Should SPGI Be on Your Watchlist?
- Decent 10.8% annual revenue growth over the last two years beat most of its peers, showing customers find value in its products and services
- Share buybacks propelled its annual earnings per share growth to 18.9%, which outperformed its revenue gains over the last two years
- ROE punches in at 23.3%, illustrating management’s expertise in identifying profitable investments
At $415.07 per share, S&P Global trades at 20.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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