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 three S&P 500 stocks to steer clear of and a few alternatives to consider.
Paychex (PAYX)
Market cap: $41.17 billion
Once known as the go-to service for small business payroll needs, Paychex (NASDAQ: PAYX) provides payroll processing, HR services, employee benefits administration, and insurance solutions to small and medium-sized businesses.
Why Does PAYX Give Us Pause?
- 9.4% annual revenue growth over the last five years was slower than its software peers
- Estimated sales growth of 5.3% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 1.2 percentage points over the last year as it scaled and became more efficient
Paychex is trading at $114.46 per share, or 5.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PAYX.
Tractor Supply (TSCO)
Market cap: $18.29 billion
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Are We Hesitant About TSCO?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.3% over the last three years was below our standards for the consumer retail sector
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Free cash flow margin shrank by 4.4 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
At $35.01 per share, Tractor Supply trades at 17.5x forward P/E. If you’re considering TSCO for your portfolio, see our FREE research report to learn more.
Sherwin-Williams (SHW)
Market cap: $81.86 billion
Widely known for its success in the paint industry, Sherwin-Williams (NYSE: SHW) is a manufacturer of paints, coatings, and related products.
Why Is SHW Not Exciting?
- 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% for the last two years
- Projected sales growth of 4.6% for the next 12 months suggests sluggish demand
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.8% annually
Sherwin-Williams’s stock price of $345.06 implies a valuation ratio of 27.4x forward P/E. Check out our free in-depth research report to learn more about why SHW doesn’t pass our bar.
Stocks we like more
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
