The 10 Most Expensive Stocks In The S&P 500

My calculations show that these stocks are the most overvalued right now

Expensive pricey stocks

Source: Shutterstock

Last week I highlighted the Top 10 Value Stocks In The S&P 500 noting that “value will have its day in the sun” in 2018. But what are the S&P 500’s most expensive stocks?

Value paying off is not a widely held view considering the Russell 1000 Growth Index (NYSEARCA:IWF) has returned 32.2% over the last year while the Russell 1000 Value Index (NYSEARCA:IWD) has returned only 14.7%.

Furthermore, high flying Netflix, Inc. (NASDAQ:NFLX) jumped to another all-time high after reporting Q4 numbers on Monday after the bell. Total subscriber growth increased 25.4% YoY which helped send the company’s market cap to over $100 billion. The chart below highlights Netflix amazing growth as well as its -$510 million cash burn in Q4 (-$2 billion in fiscal year 2017).

Source: Avory & Co.

Netflix is a timely reminder of just how much momentum these growth stocks continue to have in this market, no matter what valuation multiple they trade at. And while research suggests owning high quality value stocks significantly outperforms in the long-run, high quality growth stocks (such as Netflix) still have steam. Therefore, I decided to find companies that may be masquerading around as high growth stocks but really are not to be trifled with.

In order to find these pricey stocks, I downloaded the list of S&P 500 constituents and then used finbox.io’s spreadsheet add-on to find which companies had the following:

1) a P/E multiple that trades above its comparable public companies, and

2) projected 5-year earnings growth that’s below its comparable public companies.

OR

3) an EBITDA multiple that trades above its comparable public companies, and

4) projected 5-year EBITDA growth that’s below its comparable public companies.

AND

5) has downside as calculated from finbox.io’s fair value > 20%.

Here are the 10 most expensive stocks in the S&P 500 that I found.

The 10 Most Expensive Stocks In The S&P 500: ProLogis

ProLogis Inc (NYSE:PLD) is a massive logistics real estate company that focuses on high-barrier, high-growth markets.

Analysts covering the stock often compare the company to a peer group that includes Duke Realty Corp (NYSE:DRE), DCT Industrial Trust Inc (NYSE:DCT), First Industrial Realty Trust, Inc. (NYSE:FR) and EastGroup Properties Inc (NYSE:EGP).

Source: finbox.io

The company’s LTM EBITDA multiple of 27.1x is above all of its selected comparable public companies: DRE (14.9x), DCT (24.8x), FR (19.8x) and EGP (22.7x). Therefore you would expect the company’s future growth to be above its peer group. However, ProLogis’ projected 5-year EBITDA CAGR of 4.8% is only above DRE (-3.7%) and below DCT (9.1%), FR (6.4%) and EGP (7.2%).

Source: finbox.io

Shares of the company are up 21.1% over the last year. The stock last traded at $63.11 as of Monday January 22 and eleven separate valuation analyses imply that there is significant downside relative to its current trading price.

The 10 Most Expensive Stocks In The S&P 500: Macerich

Macerich Co (NYSE:MAC) is a f self-managed and self-administered real estate investment trust, which focuses on regional malls in the U.S.

On a comparable company basis, selected benchmark companies include CBL & Associates Properties, Inc. (NYSE:CBL), Brixmor Property Group Inc (NYSE:BRX), Kimco Realty Corp (NYSE:KIM) and Federal Realty Investment Trust (NYSE:FRT). Higher growth companies typically trade at higher valuation multiples but this does not appear to be the case for Macerich as shown below.

Source: finbox.io

The company’s projected 5-year net income CAGR of -28.7% is well below its entire peer group: CBL (-14.3%), BRX (18.1%), KIM (-5.1%) and FRT (4.0%). However, Macerich’s P/E multiple of 64.7x is above CBL (10.4x), BRX (16.3x), KIM (19.3x) and FRT (30.6x).

The company appears to be expensive on a future cash flow basis as well.

Source: finbox.io

Shares of Macerich are down -4.4% over the last year and finbox.io’s fair value estimate of $37.61 per share calculated from seven cash flow models imply -43.0% downside.

The 10 Most Expensive Stocks In The S&P 500: Align Technology

Align Technology, Inc. (NASDAQ:ALGN) manufactures and markets a system of clear orthodontics and other related products.

The company’s valuation multiples currently look expensive relative to peers: Cooper Companies Inc (NYSE:COO), Dentsply Sirona Inc (NASDAQ:XRAY), AbbVie Inc (NYSE:ABBV) and Cutera, Inc. (NASDAQ:CUTR).

Source: finbox.io

Align Technology’s LTM EBITDA multiple of 60.1x is above COO (20.8x), XRAY (22.7x), ABBV (16.6x) and CUTR (54.9x). Cutera’s multiple is only slightly below Align Technology’s but Wall Street analysts project that the former will grow its cash flows by 62.8% annually over the next five years. This is well above Align Technology’s forecasted five-year EBITDA CAGR of 25.2%.

Source: finbox.io

Align Technology’s stock currently trades at $267.10 per share as of Monday January 22, up 190.2% over the last year. However, finbox.io’s five valuation analyses suggest that shares are now roughly 35% overvalued.

The 10 Most Expensive Stocks In The S&P 500: Intuitive Surgical

Intuitive Surgical , Inc. (NASDAQ:ISRG) manufactures and markets da Vinci surgical systems, and related instruments and accessories.

Analysts covering the stock often compare Intuitive Surgical to a peer group that includes Edwards Lifesciences Corp (NYSE:EW), Hill-Rom Holdings, Inc. (NYSE:HRC), Varian Medical Systems, Inc. (NYSE:VAR) and Becton Dickinson and Co (NYSE:BDX).

Source: finbox.io

The company’s LTM EBITDA multiple of 39.8x is above all of these comparable public companies: EW (21.7x), HRC (16.4x) and BDX (26.2x). However, notice how the company’s projected 5-year EBITDA CAGR of 8.9% is only above HRC (7.7%) and below EW (13.8%), VAR (10.1%) and BDX (20.1%). This implies that the market’s valuing Intuitive Surgical at a premium.

Source: finbox.io

Shares of the company are trading 97.9% higher year over year. But the stock price could end up trading -35.5% lower in 2018 based on Intuitive Surgical’s future cash flow projections.

The 10 Most Expensive Stocks In The S&P 500: Vulcan Materials

Vulcan Materials Company (NYSE:VMC) produces and sells construction aggregates, asphalt mix, and ready-mixed concrete primarily in the United States. Vulcan Materials was founded in 1909 and is headquartered in Birmingham, Alabama.

On a comparable company basis, selected benchmark companies include Martin Marietta Materials, Inc. (NYSE:MLM), Summit Materials Inc. (NYSE:SUM), Eagle Materials, Inc. (NYSE:EXP) and CRH PLC (ADR) (NYSE:CRH). Analyzing Vulcan Materials’ valuation metrics and growth ratios provides further insight into why the stock is expensive.

Source: finbox.io

Wall Street analysts project that the company’s EBITDA grows at 11.1% over the next five years. This growth rate is only above EXP (10.3%) and below MLM (15.2%), SUM (12.5%) and CRH (12.0%). However, Vulcan Materials’ EBITDA multiple trades well above this same peer group implying the stock is quite expensive.

Source: finbox.io

Vulcan Materials’ stock currently trades at $133.00 per share as of Monday January 22, up 4.8% over the last year. On a fundamental basis, the company’s stock is trading at a -30.8% premium to finbox.io’s intrinsic value estimate.

The 10 Most Expensive Stocks In The S&P 500: Mettler-Toledo

Mettler-Toledo International Inc. (NYSE:MTD) sells precision instruments and services worldwide.

The company’s valuation multiples implied by the market currently trade above comparable companies Waters Corporation (NYSE:WAT), PerkinElmer, Inc. (NYSE:PKI), Agilent Technologies Inc (NYSE:A) and Thermo Fisher Scientific Inc. (NYSE:TMO).

Source: finbox.io

Mettler-Toledo’s LTM P/E multiple of 38.2x is above WAT (30.8x), PKI (22.4x), A (34.5x) and TMO (36.9x) while its growth is mediocre at best.

Source: finbox.io

Shares of the company are up 60.6% over the last year. The stock last traded at $670.88 as of Monday January 22 and nine separate valuation analyses imply that there is -26.5% downside relative to its current trading price.

The 10 Most Expensive Stocks In The S&P 500: Mattel

Mattel, Inc. (NASDAQ:MAT) is a massive toy manufacturer.

Sell-side research analysts often compare the company to a peer group that includes Brunswick Corporation (NYSE:BC), Polaris Industries Inc. (NYSE:PII), Acushnet Holdings, Inc. (NYSE:GOLF) and Hasbro, Inc. (NASDAQ:HAS). Notice Mattel’s projected EBITDA growth of 0% in the chart below.

Source: finbox.io

Analysts expect that the company’s EBITDA will reach the same level in 2021 as it did in 2016. However, investors purchasing shares today would pay 18.8x EBITDA for a low growth company. This looks very expensive when compared to Mattel’s peers.

Source: finbox.io

Shares of Mattel are down -44.0% over the last year and finbox.io’s fair value estimate of $12.25 per share calculated from seven cash flow models imply -23.9% downside. The average price target from 12 Wall Street analysts of $15.50 per share similarly imply downside.

The 10 Most Expensive Stocks In The S&P 500: C.H. Robinson

C.H. Robinson Worldwide Inc (NASDAQ:CHRW) is company specializing in freight transportation and logistics.

On a comparable company basis, selected benchmark companies include XPO Logistics Inc (NYSE:XPO), Union Pacific Corporation (NYSE:UNP), Norfolk Southern Corp. (NYSE: NSC) and United Parcel Service, Inc. (NYSE:UPS). Analyzing C.H. Robinson Worldwide,’s valuation metrics and growth ratios offers insight into how shares are highly expensive.

Source: finbox.io

Typically, high growth companies trade at a higher multiple of EBITDA. But notice the company’s projected 5-year EBITDA CAGR of 1.7% is well below all of its peers while its LTM EBITDA multiple of 17.1x is above this same peer group.

C.H. Robinson also looks overvalued on a cash flow basis as well.

Source: finbox.io

C.H. Robinson’s stock currently trades at $95.43 per share as of Monday January 22, up 32.4% over the last year. Finbox.io’s nine valuation analyses suggest that shares could decrease -23.5% going forward.

The 10 Most Expensive Stocks In The S&P 500: Fortive

Fortive Corp (NYSE:FTV) is a manufacturer specializing in professional test tools.

Fortive’s valuation multiples implied by the market currently trade above all selected comparable companies Dover Corp (NYSE: DOV), Pentair (NYSE:PNR), Flowserve Corp (NYSE:FLS) and AMETEK, Inc (NYSE:AME).

Source: finbox.io

Furthermore, the company’s EBITDA is only expected to grow at a quicker rate than Pentair over the next five years.

Source: finbox.io

Shares of the company are trading 37.4% higher year over year. But the stock price could end up trading -22.7% lower in 2018 based on Fortive’s future cash flow projections.

The 10 Most Expensive Stocks In The S&P 500: Coca-Cola

The Coca-Cola Company (NYSE:KO) is the manufacturer and distributor of all Coke products.

This massive beverage company is most often compared to Dr Pepper Snapple Group Inc. (NYSE:DPS), Constellation Brands (NYSE:STZ), Coca-Cola European (NYSE:CCE) and PepsiCo, Inc. (NYSE:PEP).

Source: finbox.io

Although Coca-Cola’s expected growth is in line with this peer group, the company’s P/E multiple of 44.3x is well above DPS (23.8x), STZ.B (23.2x), CCE (22.0x) and PEP (24.8x). Coca-Cola is a quality business but simply looks expensive at current prices.

Source: finbox.io

Coca-Cola’s stock currently trades at $47.38 per share as of Monday January 22, up 18.0% over the last year. On a fundamental basis, the company’s stock is trading at a -20.4% premium to finbox.io’s intrinsic value estimate.

As of this writing, Matt Hogan did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/10-expensive-stocks-sp-500/.

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