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. Keeping that in mind, here are three large-cap stocks whose existing offerings may be tapped out and some other investments you should look into instead.
Starbucks (SBUX)
Market Cap: $120.7 billion
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Does SBUX Give Us Pause?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Projected sales decline of 2.9% for the next 12 months points to a tough demand environment ahead
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 4.9 percentage points
Starbucks is trading at $105.73 per share, or 38.9x forward P/E. To fully understand why you should be careful with SBUX, check out our full research report (it’s free).
General Dynamics (GD)
Market Cap: $93.38 billion
Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.
Why Do We Think Twice About GD?
- The company has faced growth challenges as its 6.9% annual revenue increases over the last five years fell short of other industrials companies
- Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin shrank by 2.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $343.82 per share, General Dynamics trades at 20.5x forward P/E. Dive into our free research report to see why there are better opportunities than GD.
Viking (VIK)
Market Cap: $36.35 billion
From a single river cruise offering to a fleet of 96 vessels across multiple continents, Viking (NYSE:VIK) operates a fleet of small luxury cruise ships offering river, ocean, and expedition voyages focused on cultural enrichment and destination immersion.
Why Do We Avoid VIK?
- 17.5% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Operating margin of 21.8% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Viking’s stock price of $81.50 implies a valuation ratio of 24.9x forward P/E. Check out our free in-depth research report to learn more about why VIK doesn’t pass our bar.
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