The Dow Jones (^DJI) is made up of 30 of the most established and influential companies in the market. But even blue-chip stocks can struggle - some are dealing with slowing growth, outdated business models, or increasing competition.

Just because a company is in the Dow Jones doesn’t mean it’s a great investment, and StockStory is here to help you separate winners from laggards. Keeping that in mind, here are three Dow Jones stocks to avoid and some better opportunities instead.

Walmart (WMT)

Market Cap: $1.06 trillion

Known for its large-format Supercenters, Walmart (NASDAQ: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Why Are We Cautious About WMT?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.3% over the last three years was below our standards for the consumer retail sector
2. Gross margin of 24.9% is below its competitors, leaving less money for marketing and promotions
3. Poor expense management has led to an operating margin of 4.3% that is below the industry average

Walmart’s stock price of $132.56 implies a valuation ratio of 45.2x forward P/E. Dive into our free research report to see why there are better opportunities than WMT.

Verizon (VZ)

Market Cap: $196.5 billion

Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE: VZ) is a telecom giant providing a range of communications and internet services.

Why Do We Avoid VZ?

1. 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 1.4% for the last five years
2. Low free cash flow margin of 14.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Verizon is trading at $47.13 per share, or 1.4x forward price-to-sales. To fully understand why you should be careful with VZ, check out our full research report (it’s free).

IBM (IBM)

Market Cap: $205.2 billion

With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE: IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.

Why Does IBM Give Us Pause?

1. 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 4.5% for the last five years
2. Projected sales growth of 4.8% for the next 12 months suggests sluggish demand
3. Earnings per share lagged its peers over the last five years as they only grew by 6.7% annually

At $218.50 per share, IBM trades at 17x forward P/E. Check out our free in-depth research report to learn more about why IBM doesn’t pass our bar.

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