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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.
This is precisely where StockStory comes in - our job is to find you high-quality companies that can win regardless of the conditions. That said, here is one large-cap stock whose competitive advantages creates flywheel effects and two whose existing offerings may be tapped out.
Two Large-Cap Stocks to Sell:
Take-Two (TTWO)
Market Cap: $40.1 billion
Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ:TTWO) is one of the world’s largest video game publishers.
Why Does TTWO Give Us Pause?
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EBITDA margin fell by 8.3 percentage points over the last few years as it prioritized growth over profits
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Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 109% annually
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Increased cash burn over the last few years raises questions about the return timeline for its investments
Take-Two’s stock price of $225.83 implies a valuation ratio of 19.1x forward EV/EBITDA. Read our free research report to see why you should think twice about including TTWO in your portfolio, it’s free.
Lockheed Martin (LMT)
Market Cap: $110.2 billion
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.
Why Is LMT Risky?
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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 3.3% for the last five years
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Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
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Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $471 per share, Lockheed Martin trades at 16.7x forward P/E. Check out our free in-depth research report to learn more about why LMT doesn’t pass our bar.
One Large-Cap Stock to Watch:
Cardinal Health (CAH)
Market Cap: $36.4 billion
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE:CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Are We Fans of CAH?
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Massive revenue base of $222.3 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
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Estimated revenue growth of 8.4% for the next 12 months implies demand will accelerate from its two-year trend
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Earnings growth has topped the peer group average over the last five years as its EPS has compounded at 7.7% annually