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 three S&P 500 stocks that don’t make the cut and some better choices instead.
Akamai Technologies (AKAM)
Market Cap: $10.46 billion
With a massive distributed network spanning 4,100+ points of presence in nearly 130 countries, Akamai Technologies (NASDAQ:AKAM) provides a global distributed cloud platform that helps businesses deliver, secure, and optimize their digital experiences online.
Why Should You Dump AKAM?
- Sales trends were unexciting over the last two years as its 5.6% annual growth was well below the typical software company
- Gross margin of 59.1% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
At $73.11 per share, Akamai Technologies trades at 2.5x forward price-to-sales. Check out our free in-depth research report to learn more about why AKAM doesn’t pass our bar.
Microchip Technology (MCHP)
Market Cap: $35.27 billion
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Do We Avoid MCHP?
- Sales tumbled by 4.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 18.5% annually, worse than its revenue
- Free cash flow margin dropped by 15.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Microchip Technology’s stock price of $64.21 implies a valuation ratio of 37.2x forward P/E. If you’re considering MCHP for your portfolio, see our FREE research report to learn more.
Norfolk Southern (NSC)
Market Cap: $64.72 billion
Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE:NSC) is a freight transportation company operating a major railroad network across the eastern United States.
Why Should You Sell NSC?
- Weak unit sales over the past two years imply it may need to invest in improvements to get back on track
- Anticipated sales growth of 2.7% for the next year implies demand will be shaky
- Earnings per share have dipped by 4.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Norfolk Southern is trading at $286.51 per share, or 22.2x forward P/E. To fully understand why you should be careful with NSC, check out our full research report (it’s free for active Edge members).
Stocks We Like More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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