Large-cap stocks are known for their staying power and ability to weather market storms better than smaller competitors. However, their sheer size makes it more challenging to maintain high growth rates as they’ve already captured significant portions of their markets.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you find high-quality companies that can grow their earnings no matter what. That said, here is one large-cap stock with attractive long-term potential and two whose momentum may slow.
Two Large-Cap Stocks to Sell:
Keurig Dr Pepper (KDP)
Market Cap: $45.93 billion
Born out of a 2018 merger between Keurig Green Mountain and Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ: KDP) is a consumer staples powerhouse boasting a portfolio of beverages including sodas, coffees, and juices.
Why Do We Think Twice About KDP?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.6% over the last three years was below our standards for the consumer staples sector
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 4.7 percentage points
- Underwhelming 5.5% return on capital reflects management’s difficulties in finding profitable growth opportunities
Keurig Dr Pepper is trading at $33.99 per share, or 16.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than KDP.
Verisk (VRSK)
Market Cap: $40.03 billion
Processing over 2.8 billion insurance transaction records annually through one of the world's largest private databases, Verisk Analytics (NASDAQ: VRSK) provides data, analytics, and technology solutions that help insurance companies assess risk, detect fraud, and make better business decisions.
Why Does VRSK Fall Short?
- 2% annual revenue growth over the last five years was slower than its business services peers
- Earnings per share lagged its peers over the last two years as they only grew by 9.6% annually
Verisk’s stock price of $286.08 implies a valuation ratio of 39.5x forward price-to-earnings. To fully understand why you should be careful with VRSK, check out our full research report (it’s free).
One Large-Cap Stock to Buy:
Chipotle (CMG)
Market Cap: $67.22 billion
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Why Are We Backing CMG?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Average same-store sales growth of 7.7% over the past two years indicates its restaurants are resonating with diners
- Dominant market position is represented by its $11.31 billion in revenue and gives it fixed cost leverage when sales grow
At $49.70 per share, Chipotle trades at 37.8x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
