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 is precisely where StockStory comes in - our job is to find you high-quality companies that can win regardless of the conditions. Keeping that in mind, here are three large-cap stocks whose momentum may slow and a few alternatives you should consider instead.
Comcast (CMCSA)
Market cap: $84.76 billion
Formerly known as American Cable Systems, Comcast (NASDAQ: CMCSA) is a multinational telecommunications company offering a wide range of services.
Why Do We Think CMCSA Will Underperform?
- Demand for its offerings was relatively low as its number of domestic broadband customers has underwhelmed
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $23.92 per share, Comcast trades at 6.8x forward P/E. To fully understand why you should be careful with CMCSA, check out our full research report (it’s free).
Capital One (COF)
Market cap: $126.8 billion
Starting as a credit card company in 1988 before expanding into a full-service bank, Capital One (NYSE: COF) is a financial services company that offers credit cards, auto loans, banking services, and commercial lending to consumers and businesses.
Why Is COF Not Exciting?
- Earnings per share fell by 5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Tangible book value per share stagnated over the last five years, limiting its ability to leverage its balance sheet to make additional investments
- Low return on equity reflects management’s struggle to allocate funds effectively
Capital One is trading at $212.67 per share, or 8.9x forward P/E. Check out our free in-depth research report to learn more about why COF doesn’t pass our bar.
Chubb (CB)
Market cap: $141 billion
Dating back to when a Civil War veteran created a frost-proof water meter, Chubb Limited (NYSE: CB) provides commercial and personal property and casualty insurance, reinsurance, and life insurance products to a diverse client base across 54 countries.
Why Do We Think Twice About CB?
- Scale presents growth limitations compared to smaller competitors, evidenced by its below-average 6.6% annualized growth in net premiums earned for the last two years
- Costs have risen faster than its revenue over the last five years, causing its pre-tax profit margin to decline by 3.8 percentage points
- Annual book value per share growth of 8.3% over the last two years lagged behind its insurance peers as its large balance sheet made it difficult to generate incremental capital growth
Chubb’s stock price of $368.60 implies a valuation ratio of 1.8x forward P/B. Read our free research report to see why you should think twice about including CB in your portfolio.
Stocks we like more
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