2 S&P 500 Stocks to Research Further and 1 We Avoid

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.

Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. That said, here are two S&P 500 stocks positioned to outperform and one best left off your watchlist.

One Stock to Sell:

Builders FirstSource (BLDR)

Market Cap: $13.07 billion

Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.

Why Are We Wary of BLDR?

1. Annual sales declines of 7.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have dipped by 22.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Builders FirstSource is trading at $118.56 per share, or 13.7x forward P/E. If you’re considering BLDR for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

Vertex Pharmaceuticals (VRTX)

Market Cap: $98.9 billion

Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ:VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.

Why Are We Fans of VRTX?

1. Solid 16.1% annual revenue growth over the last five years indicates its offering’s solve complex business issues
2. Earnings growth has trumped its peers over the last five years as its EPS has compounded at 15.9% annually
3. Industry-leading 41.8% return on capital demonstrates management’s skill in finding high-return investments

At $380 per share, Vertex Pharmaceuticals trades at 19.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.

HCA Healthcare (HCA)

Market Cap: $98.06 billion

With roots dating back to 1968 and a network spanning 20 states, HCA Healthcare (NYSE:HCA) operates a network of 190 hospitals and 150+ outpatient facilities providing a full range of medical services across the US and England.

Why Is HCA a Top Pick?

1. Enormous revenue base of $72.7 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
2. Share buybacks catapulted its annual earnings per share growth to 17.5%, which outperformed its revenue gains over the last five years
3. Free cash flow margin increased by 8.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders

HCA Healthcare’s stock price of $415 implies a valuation ratio of 15.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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