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?
- 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
- Gross margin of 30.3% is an output of its commoditized inventory
- 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?
- 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
- 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?
- Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
- 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.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.