“Too big to fail” is how we would describe the megacap stocks in this article today. While they will likely stand the test of time, it’s not all sunshine and rainbows as their scale can limit their ability to find new sources of growth.
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 are two industry titans that still have big upside potential and one whose momentum may slow.
One Mega-Cap Stock to Sell:
Citigroup (C)
Market Cap: $201.4 billion
With operations in nearly 160 countries and a history dating back to 1812, Citigroup (NYSE:C) is a global financial services company that provides banking, investment, wealth management, and payment solutions to consumers, corporations, and governments.
Why Does C Fall Short?
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Scale is a double-edged sword because it limits the firm’s growth potential compared to its smaller competitors, as reflected in its below-average annual net interest income increases of 8.6% for the last five years
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Net interest margin of 2.5% is well below other banks, signaling its loans aren’t very profitable
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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
Citigroup is trading at $121.75 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why C doesn’t pass our bar.
Two Mega-Cap Stocks to Buy:
Nvidia (NVDA)
Market Cap: $5.24 trillion
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Is NVDA a Top Pick?
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Annual revenue growth of 77.4% over the past two years was outstanding, reflecting market share gains this cycle
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Share repurchases have amplified shareholder returns as its annual earnings per share growth of 82.6% exceeded its revenue gains over the last five years
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Robust free cash flow margin of 42.5% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $217.17 per share, Nvidia trades at 17.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
GE Vernova (GEV)
Market Cap: $241.9 billion
Born from the energy business of industrial giant General Electric in a 2023 spin-off, GE Vernova (NYSE:GEV) designs, manufactures, and services power generation equipment and grid technologies to help customers build more reliable and sustainable electric systems.
