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 steer clear of and a few alternatives to consider.
Kraft Heinz (KHC)
Market Cap: $29.09 billion
The result of a 2015 mega-merger between Kraft and Heinz, Kraft Heinz (NASDAQ: KHC) is a packaged foods giant whose products span coffee to cheese to packaged meat.
Why Is KHC Risky?
- Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 34.6 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
Kraft Heinz is trading at $24.50 per share, or 9.8x forward P/E. Dive into our free research report to see why there are better opportunities than KHC.
Mohawk Industries (MHK)
Market Cap: $7.15 billion
Established in 1878, Mohawk Industries (NYSE: MHK) is a leading producer of floor-covering products for both residential and commercial applications.
Why Do We Steer Clear of MHK?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3%
- ROIC of 3.7% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Mohawk Industries’s stock price of $115.25 implies a valuation ratio of 11.6x forward P/E. If you’re considering MHK for your portfolio, see our FREE research report to learn more.
Zebra (ZBRA)
Market Cap: $13.24 billion
Taking its name from the black and white stripes of barcodes, Zebra Technologies (NASDAQ: ZBRA) provides barcode scanners, mobile computers, RFID systems, and other data capture technologies that help businesses track assets and optimize operations.
Why Are We Cautious About ZBRA?
- Muted 1.7% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin dropped by 7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $260 per share, Zebra trades at 15.3x forward P/E. Check out our free in-depth research report to learn more about why ZBRA doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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).
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