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.
Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. 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:
onsemi (ON)
Market Cap: $22.99 billion
Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ: ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.
Why Does ON Worry Us?
- Annual sales declines of 14.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Estimated sales growth of 4.9% for the next 12 months is soft and implies weaker demand
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 17.7 percentage points
onsemi’s stock price of $58.92 implies a valuation ratio of 20.9x forward P/E. Read our free research report to see why you should think twice about including ON in your portfolio.
Pool (POOL)
Market Cap: $7.29 billion
Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ: POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.
Why Do We Steer Clear of POOL?
- Lackluster 6.1% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Free cash flow margin is anticipated to expand by 1.6 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $198.50 per share, Pool trades at 18.3x forward P/E. Check out our free in-depth research report to learn more about why POOL doesn’t pass our bar.
One Stock to Buy:
EMCOR (EME)
Market Cap: $32.64 billion
Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services
Why Do We Love EME?
- Market share has increased this cycle as its 16.2% annual revenue growth over the last two years was exceptional
- Share repurchases over the last two years enabled its annual earnings per share growth of 45.6% to outpace its revenue gains
- Improving returns on capital reflect management’s ability to monetize investments
EMCOR is trading at $727.86 per share, or 25.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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