Large-cap stocks usually command their industries because they have the scale to drive market trends. The flip side though is that their sheer size can limit growth as expanding further becomes an increasingly challenging task.
This dynamic can trouble even the most skilled investors, but luckily for you, we started StockStory to help you navigate these trade-offs and uncover exceptional companies that break the mold. That said, here is one large-cap stock with attractive long-term potential and two whose momentum may slow.
Two large-cap stocks to sell:
Disney (DIS)
Market cap: $197.2 billion
Founded by brothers Walt and Roy, Disney (NYSE: DIS) is a multinational entertainment conglomerate, renowned for its theme parks, movies, television networks, and merchandise.
Why Are We Bearish on DIS?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 9.2% over the last five years was below our standards for the consumer discretionary sector
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Disney is trading at $113.99 per share, or 15x forward P/E. Read our free research report to see why you should think twice about including DIS in your portfolio.
Northrop Grumman (NOC)
Market cap: $78.18 billion
Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.
Why Are We Out on NOC?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Anticipated sales growth of 5.8% for the next year implies demand will be shaky
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 2% annually
Northrop Grumman’s stock price of $548.65 implies a valuation ratio of 18.8x forward P/E. Check out our free in-depth research report to learn more about why NOC doesn’t pass our bar.
One large-cap stock to watch:
Nasdaq (NDAQ)
Market cap: $59.36 billion
Originally founded in 1971 as the world's first electronic stock market, Nasdaq (NASDAQ: NDAQ) operates global exchanges and provides technology, data, and corporate services that help companies, investors, and financial institutions navigate capital markets.
Why Do We Watch NDAQ?
- Annual revenue growth of 12.4% over the last two years beat the sector average and underscores the unique value of its offerings
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $106.83 per share, Nasdaq trades at 23.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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