“Too big to fail” is how we would describe the megacap stocks in this article today. While they will likely stand the test of time, it’s not all sunshine and rainbows as their scale can limit their ability to find new sources of growth.
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. Keeping that in mind, here is one industry titan with attractive long-term potential and two whose existing offerings may be tapped out.
Two Mega-Cap Stocks to Sell:
Home Depot (HD)
Market Cap: $309.7 billion
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE:HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Why Are We Hesitant About HD?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3% over the last three years was below our standards for the consumer retail sector
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 33.1% that must be offset through higher volumes
Home Depot’s stock price of $311.05 implies a valuation ratio of 20.3x forward P/E. To fully understand why you should be careful with HD, check out our full research report (it’s free).
Cisco (CSCO)
Market Cap: $431.4 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ:CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Are We Cautious About CSCO?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 4.9% for the last five years
- 4.6 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
- Waning returns on capital imply its previous profit engines are losing steam
At $109.45 per share, Cisco trades at 21.3x forward P/E. If you’re considering CSCO for your portfolio, see our FREE research report to learn more.
One Mega-Cap Stock to Watch:
Costco (COST)
Market Cap: $400.3 billion
Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ:COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.
Why Is COST Interesting?
- Same-store sales growth averaged 6.6% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Dominant market position is represented by its $293.6 billion in revenue, which compensates for its subpar gross margin
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
Costco is trading at $902.75 per share, or 41.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.