2 Large-Cap Stocks with Exciting Potential and 1 We Find Risky

Large-cap stocks have the power to shape entire industries thanks to their size and widespread influence. With such vast footprints, however, finding new areas for growth is much harder than for smaller, more agile players.

This dynamic can trouble even the most skilled investors, but luckily for you, we started StockStory to help you navigate these trade-offs and uncover exceptional companies that break the mold. That said, here are two large-cap stocks that still have big upside potential and one whose momentum may slow.

One Large-Cap Stock to Sell:

Target (TGT)

Market Cap: $40.13 billion

With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.

Why Are We Hesitant About TGT?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Gross margin of 28.1% is an output of its commoditized inventory
3. Performance over the past six years shows its incremental sales were much less profitable, as its earnings per share fell by 4.2% annually

Target is trading at $88.24 per share, or 11.5x forward P/E. To fully understand why you should be careful with TGT, check out our full research report (it’s free).

Two Large-Cap Stocks to Watch:

Tractor Supply (TSCO)

Market Cap: $30.39 billion

Started as a mail-order tractor parts business, Tractor Supply (NASDAQ:TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.

Why Do We Watch TSCO?

1. Fast expansion of new stores indicates an aggressive approach to attacking untapped market opportunities
2. Forecasted revenue growth of 6.7% for the next 12 months indicates its momentum over the last six years is sustainable
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $57.73 per share, Tractor Supply trades at 26x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Xylem (XYL)

Market Cap: $34.43 billion

Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Why Could XYL Be a Winner?

1. Market share has increased this cycle as its 20.1% annual revenue growth over the last two years was exceptional
2. Offerings are difficult to replicate at scale and lead to a top-tier gross margin of 37.6%
3. Earnings per share grew by 15.9% annually over the last two years, massively outpacing its peers

Xylem’s stock price of $141.46 implies a valuation ratio of 29.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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