Large-cap stocks have the power to shape entire industries thanks to their size and widespread influence. With such vast footprints, however, finding new areas for growth is much harder than for smaller, more agile players.
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 large-cap stock that still has big upside potential and two whose existing offerings may be tapped out.
Two Large-Cap Stocks to Sell:
Royal Caribbean (RCL)
Market Cap: $74.12 billion
Established in 1968, Royal Caribbean Cruises (NYSE: RCL) is a global cruise vacation company renowned for its innovative and exciting cruise experiences.
Why Do We Avoid RCL?
- The company has faced growth challenges as its 13.6% annual revenue increases over the last two years fell short of other consumer discretionary companies
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 9.4% for the last two years
- Underwhelming 4.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
Royal Caribbean is trading at $275.55 per share, or 15.5x forward P/E. Read our free research report to see why you should think twice about including RCL in your portfolio.
Carrier Global (CARR)
Market Cap: $45.67 billion
Founded by the inventor of air conditioning, Carrier Global (NYSE: CARR) manufactures heating, ventilation, air conditioning, and refrigeration products.
Why Are We Out on CARR?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share fell by 2.8% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Diminishing returns on capital suggest its earlier profit pools are drying up
Carrier Global’s stock price of $55.29 implies a valuation ratio of 21.3x forward P/E. If you’re considering CARR for your portfolio, see our FREE research report to learn more.
One Large-Cap Stock to Watch:
Coherent (COHR)
Market Cap: $47.51 billion
Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE: COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.
Why Is COHR Interesting?
- Annual revenue growth of 16.6% over the last two years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 24.7% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share grew by 69.9% annually over the last two years, massively outpacing its peers
At $247.73 per share, Coherent trades at 42.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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