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. Keeping that in mind, here is one S&P 500 stock that is positioned to outperform and two that may struggle.
Two Stocks to Sell:
PTC (PTC)
Market Cap: $18.53 billion
Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ: PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.
Why Does PTC Fall Short?
- 8% annual revenue growth over the last three years was slower than its software peers
- Average billings growth of 7% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
At $154.03 per share, PTC trades at 7.3x forward price-to-sales. To fully understand why you should be careful with PTC, check out our full research report (it’s free).
Paychex (PAYX)
Market Cap: $51.58 billion
One of the oldest service providers in the industry, Paychex (NASDAQ: PAYX) offers its customers payroll and HR software solutions.
Why Are We Cautious About PAYX?
- Annual revenue growth of 6.6% over the last three years was well below our standards for the software sector
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 6.8%
Paychex is trading at $143.29 per share, or 8.9x forward price-to-sales. Check out our free in-depth research report to learn more about why PAYX doesn’t pass our bar.
One Stock to Buy:
Lululemon (LULU)
Market Cap: $32.32 billion
Originally serving yogis and hockey players, Lululemon (NASDAQ: LULU) is a designer, distributor, and retailer of athletic apparel for men and women.
Why Are We Backing LULU?
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 8.1% growth over the past two years
- Collection of products is difficult to replicate at scale and results in a best-in-class gross margin of 58.8%
- Robust free cash flow margin of 16% gives it many options for capital deployment
Lululemon’s stock price of $268.20 implies a valuation ratio of 17.4x forward price-to-earnings. 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 9 Market-Beating Stocks. 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.
