3 S&P 500 Stocks with Mounting Challenges
While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here are three S&P 500 stocks to avoid and some better alternatives instead.
Paramount (PARA)
Market Cap: $8.74 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Are We Out on PARA?
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Sales tumbled by 2.3% annually over the last two years, showing consumer trends are working against its favor
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Earnings per share fell by 22.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
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Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Paramount is trading at $12.29 per share, or 8.2x forward P/E. To fully understand why you should be careful with PARA, check out our full research report (it’s free).
Vertex Pharmaceuticals (VRTX)
Market Cap: $113.9 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 Does VRTX Fall Short?
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Incremental sales over the last five years were much less profitable as its earnings per share fell by 15.6% annually while its revenue grew
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Free cash flow margin shrank by 58.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
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Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $442.70 per share, Vertex Pharmaceuticals trades at 23.9x forward P/E. Read our free research report to see why you should think twice about including VRTX in your portfolio, it’s free.
EPAM (EPAM)
Market Cap: $9.86 billion
Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.
Why Are We Cautious About EPAM?
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Constant currency revenue growth has disappointed over the past two years and shows demand was soft
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7.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
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Eroding returns on capital suggest its historical profit centers are aging
EPAM’s stock price of $176 implies a valuation ratio of 16x forward P/E. If you’re considering EPAM for your portfolio, see our FREE research report to learn more.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 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-small-cap company Comfort Systems (+782% 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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