3 S&P 500 Stocks We Approach with Caution

While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.

Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here are three S&P 500 stocks that don’t make the cut and some better choices instead.

Dollar General (DG)

Market Cap: $28 billion

Appealing to the budget-conscious consumer, Dollar General (NYSE:DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.

Why Are We Hesitant About DG?

1. Annual sales growth of 3.9% over the last three years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. Gross margin of 30.3% is an output of its commoditized inventory
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

Dollar General is trading at $127.58 per share, or 16.9x forward P/E. To fully understand why you should be careful with DG, check out our full research report (it’s free).

PayPal (PYPL)

Market Cap: $49.56 billion

Originally spun off from eBay in 2015 after being acquired by the auction giant in 2002, PayPal (NASDAQ:PYPL) operates a global digital payments platform that enables consumers and merchants to send, receive, and process payments online and in person.

Why Do We Avoid PYPL?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.9% over the last two years was below our standards for the financials sector
2. Incremental sales over the last two years were less profitable as its 2.3% annual earnings per share growth lagged its revenue gains

PayPal’s stock price of $58.93 implies a valuation ratio of 10.5x forward P/E. Read our free research report to see why you should think twice about including PYPL in your portfolio.

Centene (CNC)

Market Cap: $33.09 billion

Serving nearly 1 in 15 Americans through its government healthcare programs, Centene (NYSE:CNC) is a healthcare company that manages government-sponsored health insurance programs like Medicaid and Medicare for low-income and complex-needs populations.

Why Are We Cautious About CNC?

1. Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
2. Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $67.55 per share, Centene trades at 13.9x forward P/E. If you’re considering CNC for your portfolio, see our FREE research report to learn more.

Stocks We Like More

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

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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.