Large-cap stocks usually command their industries because they have the scale to drive market trends. The flip side though is that their sheer size can limit growth as expanding further becomes an increasingly challenging task.
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. That said, here is one large-cap stock with attractive long-term potential and two that could be stalling.
Market Cap: $44.82 billion
Established in 1906, CBRE (NYSE:CBRE) is one of the largest commercial real estate services firms in the world.
Why Is CBRE Risky?
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Sizable revenue base leads to growth challenges as its 10.3% annual revenue increases over the last five years fell short of other consumer discretionary companies
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Poor free cash flow margin of 3.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
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Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
CBRE is trading at $150.01 per share, or 22.1x forward P/E. Check out our free in-depth research report to learn more about why CBRE doesn’t pass our bar.
Market Cap: $36.3 billion
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Are We Hesitant About OTIS?
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Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
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Projected sales growth of 4.8% for the next 12 months suggests sluggish demand
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Free cash flow margin shrank by 2.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Otis’s stock price of $91.50 implies a valuation ratio of 21.5x forward P/E. If you’re considering OTIS for your portfolio, see our FREE research report to learn more.
Market Cap: $58.01 billion
Providing body cameras and tasers for first responders, AXON (NASDAQ:AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
Why Is AXON a Top Pick?
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Products are reaching more customers as its unit sales averaged 28.8% growth over the past two years
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Additional sales over the last two years increased its profitability as the 46.5% annual growth in its earnings per share outpaced its revenue
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Historical investments are beginning to pay off as its returns on capital are growing
