The S&P 500 (^GSPC) is often seen as a benchmark for strong businesses, but that doesn’t mean every stock is worth owning. Some companies face significant challenges, whether it’s stagnating growth, heavy debt, or disruptive new competitors.
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 two S&P 500 stocks that could deliver good returns and one best left off your watchlist.
One Stock to Sell:
Labcorp (LH)
Market Cap: $21.92 billion
With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE: LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.
Why Does LH Fall Short?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 13.3 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $261.89 per share, Labcorp trades at 15.9x forward P/E. Check out our free in-depth research report to learn more about why LH doesn’t pass our bar.
Two Stocks to Watch:
Colgate-Palmolive (CL)
Market Cap: $75.19 billion
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE: CL) is a consumer products company that focuses on personal, household, and pet products.
Why Could CL Be a Winner?
- Large revenue base of $19.95 billion and strong customer awareness make retailers more likely to stock its products
- Strong free cash flow margin of 16.3% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
Colgate-Palmolive’s stock price of $92.78 implies a valuation ratio of 24.7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Merck (MRK)
Market Cap: $203.2 billion
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Do We Like MRK?
- Massive revenue base of $63.92 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
- Free cash flow margin increased by 10.7 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Industry-leading 15.6% return on capital demonstrates management’s skill in finding high-return investments
Merck is trading at $80.93 per share, or 8.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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
