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.
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 may struggle.
Market Cap: $16.76 billion
As a pioneer in 3D mammography technology that has revolutionized breast cancer detection, Hologic (NASDAQ:HOLX) develops and manufactures diagnostic products, medical imaging systems, and surgical devices focused primarily on women’s health and wellness.
Why Does HOLX Fall Short?
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Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
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Free cash flow margin shrank by 20.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
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Waning returns on capital imply its previous profit engines are losing steam
At $75.22 per share, Hologic trades at 16.5x forward P/E. To fully understand why you should be careful with HOLX, check out our full research report (it’s free for active Edge members).
Market Cap: $19.56 billion
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Is WST Not Exciting?
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Annual revenue growth of 1.5% over the last two years was below our standards for the healthcare sector
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Efficiency has decreased over the last five years as its adjusted operating margin fell by 5.5 percentage points
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Diminishing returns on capital suggest its earlier profit pools are drying up
West Pharmaceutical Services is trading at $271.95 per share, or 35.9x forward P/E. Read our free research report to see why you should think twice about including WST in your portfolio, it’s free for active Edge members.
Market Cap: $227 billion
With nicknames spanning Mickey D’s in the U.S. to Makku in Japan, McDonald’s (NYSE:MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Is MCD Interesting?
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Rapidly increasing restaurant base reflects a desire to sell in new markets and scale quickly
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Attractive franchise model leads to wonderful unit economics and a best-in-class gross margin of 57%
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Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety