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. Keeping that in mind, here is one S&P 500 stock that could deliver good returns and two best left off your watchlist.
Two stocks to sell:
Microchip Technology (MCHP)
Market cap: $43.53 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 Think MCHP Will Underperform?
- Annual sales declines of 11.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 9.6% annually, worse than its revenue declines
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15 percentage points
Microchip Technology’s stock price of $79.83 implies a valuation ratio of 19.2x forward P/E. Check out our free in-depth research report to learn more about why MCHP doesn’t pass our bar.
PulteGroup (PHM)
Market cap: $22.39 billion
Having delivered over 850,000 homes since its founding in 1950, PulteGroup (NYSE: PHM) is one of America's largest homebuilders, constructing single-family homes, townhouses, and condominiums for first-time, move-up, and active adult buyers across 46 markets in 25 states.
Why Are We Bearish on PHM?
- Annual sales declines of 4% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 15.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Waning returns on capital imply its previous profit engines are losing steam
PulteGroup is trading at $121.71 per share, or 13x forward P/E. Dive into our free research report to see why there are better opportunities than PHM.
One stock to watch:
Veeva Systems (VEEV)
Market cap: $50.75 billion
Originally named "Verticals onDemand" before rebranding in 2009, Veeva Systems (NYSE: VEEV) provides cloud software, data solutions, and consulting services that help life sciences companies develop and bring products to market more efficiently.
Why Are We Fans of VEEV?
- Billings have averaged 17.8% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $313.05 per share, Veeva Systems trades at 13.4x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks we like even more
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
