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 are two S&P 500 stocks positioned to outperform and one that could be in trouble.
One Stock to Sell:
Electronic Arts (EA)
Market Cap: $50.31 billion
Best known for its Madden NFL and FIFA sports franchises, Electronic Arts (NASDAQ: EA) is one of the world’s largest video game publishers.
Why Are We Cautious About EA?
- 3% annual revenue growth over the last three years was slower than its consumer internet peers
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.8%
- Day-to-day expenses have swelled relative to revenue over the last few years as its EBITDA margin fell by 3.2 percentage points
Electronic Arts is trading at $200.38 per share, or 16.9x forward EV/EBITDA. If you’re considering EA for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Datadog (DDOG)
Market Cap: $74.03 billion
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ: DDOG) provides a software platform that helps organizations monitor and secure their cloud applications, infrastructure, and services.
Why Should You Buy DDOG?
- Ability to secure long-term commitments with customers is evident in its 29.5% ARR growth over the last year
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Datadog’s stock price of $207.54 implies a valuation ratio of 16.3x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Allegion (ALLE)
Market Cap: $10.8 billion
Allegion plc (NYSE: ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Could ALLE Be a Winner?
- Healthy operating margin of 19.6% shows it’s a well-run company with efficient processes, and its rise over the last five years was fueled by some leverage on its fixed costs
- 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
- Industry-leading 22.1% return on capital demonstrates management’s skill in finding high-return investments
At $125.77 per share, Allegion trades at 14.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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