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.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here is one S&P 500 stock that is leading the market forward and two that could be in trouble.
Two Stocks to Sell:
Dollar General (DG)
Market Cap: $23.15 billion
Appealing to the budget-conscious consumer, Dollar General (NYSE: DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.
Why Are We Wary of DG?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.1% over the last three years was below our standards for the consumer retail sector
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 30.2% that must be offset through higher volumes
- Earnings per share have contracted by 13.8% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Dollar General’s stock price of $104.51 implies a valuation ratio of 14.4x forward P/E. To fully understand why you should be careful with DG, check out our full research report (it’s free).
Paramount (PSKY)
Market Cap: $11.51 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ: PSKY) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Is PSKY Risky?
- Annual sales growth of 2.1% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.3 percentage points over the next year
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $10.27 per share, Paramount trades at 12.8x forward P/E. If you’re considering PSKY for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Palantir Technologies (PLTR)
Market Cap: $329.4 billion
Named after the all-seeing stones in "Lord of the Rings," Palantir Technologies (NASDAQ: PLTR) develops software platforms that help government agencies and enterprises integrate, analyze, and operationalize their data for decision-making.
Why Should You Buy PLTR?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 67.6% over the last year
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Palantir Technologies is trading at $137.65 per share, or 41.3x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive 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.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
