3 S&P 500 Stocks with Warning Signs
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.
Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. Keeping that in mind, here are three S&P 500 stocks to avoid and some better alternatives instead.
Walmart (WMT)
Market Cap: $838.8 billion
Known for its large-format Supercenters, Walmart (NASDAQ:WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Why Are We Cautious About WMT?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.3% over the last three years was below our standards for the consumer retail sector
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 24.9%
- Subpar operating margin of 4.3% constrains its ability to invest in process improvements or effectively respond to new competitive threats
Walmart’s stock price of $105.84 implies a valuation ratio of 35.3x forward P/E. Read our free research report to see why you should think twice about including WMT in your portfolio.
Disney (DIS)
Market Cap: $182.7 billion
Founded by brothers Walt and Roy, Disney (NYSE:DIS) is a multinational entertainment conglomerate, renowned for its theme parks, movies, television networks, and merchandise.
Why Do We Think DIS Will Underperform?
- 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 9.2% for the last five years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Disney is trading at $105.74 per share, or 13.9x forward P/E. Dive into our free research report to see why there are better opportunities than DIS.
General Dynamics (GD)
Market Cap: $95.7 billion
Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.
Why Are We Hesitant About GD?
- The company has faced growth challenges as its 7.3% annual revenue increases over the last five years fell short of other industrials companies
- Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 7.4% annually
At $356 per share, General Dynamics trades at 20.1x forward P/E. Check out our free in-depth research report to learn more about why GD doesn’t pass our bar.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.