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.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. Keeping that in mind, here are three S&P 500 stocks to avoid and some better alternatives instead.
onsemi (ON)
Market Cap: $28.47 billion
Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ:ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.
Why Do We Pass on ON?
- Annual sales declines of 10.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 12.8%
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 16.9 percentage points
onsemi is trading at $73.29 per share, or 18.5x forward P/E. Dive into our free research report to see why there are better opportunities than ON.
Cummins (CMI)
Market Cap: $71.88 billion
With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE:CMI) offers engines and power systems.
Why Does CMI Worry Us?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Gross margin of 24.8% reflects its high production costs
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $527.70 per share, Cummins trades at 16.2x forward P/E. Check out our free in-depth research report to learn more about why CMI doesn’t pass our bar.
Delta (DAL)
Market Cap: $48.83 billion
One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE:DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Think DAL Will Underperform?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Delta’s stock price of $74.73 implies a valuation ratio of 11.4x forward P/E. If you’re considering DAL for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.