3 Nasdaq 100 Stocks We Keep Off Our Radar

The Nasdaq 100 (^NDX) is known for housing some of the most innovative and fastest-growing companies in the market. But not every stock in the index is a winner – some are struggling with slowing growth, increasing competition, or unsustainable valuations.

Even among high-growth companies, some are struggling, which is why we built StockStory – to help you separate winners from losers. That said, here are three Nasdaq 100 stocks that don’t make the cut and some better choices instead.

Market Cap: $26.49 billion

Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.

Why Do We Avoid MCHP?

1. Sales tumbled by 4.2% annually over the last five years, showing market trends are working against its favor during this cycle

2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 14.5 percentage points

Microchip Technology’s stock price of $49.47 implies a valuation ratio of 25x forward P/E. Read our free research report to see why you should think twice about including MCHP in your portfolio, it’s free for active Edge members.

Market Cap: $51.26 billion

Founded more than a century ago, PACCAR (NASDAQ:PCAR) designs and manufactures commercial trucks of various weights and sizes for the commercial trucking industry.

Why Does PCAR Worry Us?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth

2. Forecasted revenue decline of 5.2% for the upcoming 12 months implies demand will fall even further

3. Earnings per share have dipped by 19.6% annually over the past two years, which is concerning because stock prices follow EPS over the long term

PACCAR is trading at $97.63 per share, or 19.5x forward P/E. Check out our free in-depth research report to learn more about why PCAR doesn’t pass our bar.

Market Cap: $75.62 billion

Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ:REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.

Why Does REGN Give Us Pause?

1. 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 4.3% for the last two years

2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 23.8 percentage points

3. Diminishing returns on capital suggest its earlier profit pools are drying up