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.
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 are three S&P 500 stocks that don’t make the cut and some better choices instead.
Dollar General (DG)
Market Cap: $27.54 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 Do We Think Twice About DG?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 4% for the last three years
- Gross margin of 30.7% is below its competitors, leaving less money for marketing and promotions
- Underwhelming 8.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
Dollar General is trading at $124.27 per share, or 15.3x forward P/E. If you’re considering DG for your portfolio, see our FREE research report to learn more.
IBM (IBM)
Market Cap: $212.5 billion
With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE: IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.
Why Are We Wary of IBM?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.3% over the last five years was below our standards for the business services sector
- Estimated sales growth of 4.1% for the next 12 months is soft and implies weaker demand
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 8.6% annually
IBM’s stock price of $225.61 implies a valuation ratio of 17.8x forward P/E. To fully understand why you should be careful with IBM, check out our full research report (it’s free).
Equifax (EFX)
Market Cap: $17.4 billion
Holding detailed financial records on over 800 million consumers worldwide and dating back to 1899, Equifax (NYSE: EFX) is a global data analytics company that collects, analyzes, and sells consumer and business credit information to lenders, employers, and other businesses.
Why Are We Cautious About EFX?
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 3.6 percentage points
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 1.1% annually
At $148.44 per share, Equifax trades at 16.3x forward P/E. Dive into our free research report to see why there are better opportunities than EFX.
Stocks We Like 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.
