The Nasdaq 100 (^NDX) is home to some of the biggest success stories in tech and growth investing. However, certain stocks in the index face challenges like profitability concerns, rising costs, or shifts in market trends.
With rapid innovation comes rapid change, and StockStory is here to help you identify which Nasdaq 100 stocks are still worth your money. That said, here is one Nasdaq 100 stock driving the future of tech and two that may face some trouble.
Two Stocks to Sell:
Old Dominion Freight Line (ODFL)
Market Cap: $34.65 billion
With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQ: ODFL) delivers less-than-truckload (LTL) and full-container load freight.
Why Are We Cautious About ODFL?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Earnings per share have contracted by 5.8% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Old Dominion Freight Line’s stock price of $166.74 implies a valuation ratio of 34.8x forward P/E. To fully understand why you should be careful with ODFL, check out our full research report (it’s free for active Edge members).
Cisco (CSCO)
Market Cap: $295.2 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Does CSCO Fall Short?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Free cash flow margin dropped by 5.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital suggest its historical profit centers are aging
At $74.68 per share, Cisco trades at 17.9x forward P/E. Check out our free in-depth research report to learn more about why CSCO doesn’t pass our bar.
One Stock to Watch:
Qualcomm (QCOM)
Market Cap: $191.5 billion
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ: QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Are We Fans of QCOM?
- Impressive 15.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Strong free cash flow margin of 28.9% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
- ROIC punches in at 47%, illustrating management’s expertise in identifying profitable investments
Qualcomm is trading at $180.63 per share, or 15.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
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