3 S&P 500 Stocks with Questionable Fundamentals

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 to avoid and some better alternatives instead.

Amazon (AMZN)

Market Cap: $2.40 trillion

Founded by Jeff Bezos after quitting his stock-picking job at D.E. Shaw, Amazon (NASDAQ:AMZN) is the world’s largest online retailer and provider of cloud computing services.

Why Are We Hesitant About AMZN?

1. Amazon revolutionized the way consumers shop. But its capital-intensive online retail business caps its profitability, leading to margins that lag behind its Magnificent 7 peers.
2. Although Amazon Web Services is a gold mine producing mission-critical infrastructure, its outsized scale limits its growth rate compared to smaller peers such as Microsoft Azure and Google Cloud Platform.
3. Returns on invested capital are well below their pre-COVID peak as the company is in the middle of an investment cycle. Will Amazon ever harvest profits or keep pushing them to the future?

Amazon’s stock price of $225.98 implies a valuation ratio of 35.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why AMZN doesn’t pass our bar.

Salesforce (CRM)

Market Cap: $250.8 billion

Launched in 1999 from a rented one-bedroom apartment in San Francisco by Marc Benioff and his three co-founders, Salesforce (NYSE:CRM) is a software-as-a-service platform that helps companies access, manage, and share sales information such as leads.

Why Are We Wary of CRM?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 11.4% over the last three years was below our standards for the software sector
2. ARR growth averaged a weak 8.7% over the last year, suggesting that competition is pulling some attention away from its software
3. Estimated sales growth of 9.1% for the next 12 months implies demand will slow from its three-year trend

Salesforce is trading at $262.45 per share, or 6x forward price-to-sales. Read our free research report to see why you should think twice about including CRM in your portfolio.

Carrier Global (CARR)

Market Cap: $65.37 billion

Founded by the inventor of air conditioning, Carrier Global (NYSE:CARR) manufactures heating, ventilation, air conditioning, and refrigeration products.

Why Do We Think Twice About CARR?

1. 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
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.9 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

At $76.63 per share, Carrier Global trades at 25x forward P/E. Dive into our free research report to see why there are better opportunities than CARR.

Stocks We Like More

Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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