Beware of These 4 Overvalued Large-Cap Stocks

NYSE: CLX | Clorox Co. News, Ratings, and Charts

CLX – Despite the latest federal interest rate increases, the U.S. markets are plumbing record lows amid skyrocketing core inflation. Given the volatile backdrop, we think it could be wise to avoid the stocks of large-cap companies Clorox Company (CLX), Consolidated Edison (ED), Telefónica (TEF), and Avis Budget Group (CAR). These stocks look overvalued at their current price levels and might witness further declines in the near term. Let’s discuss.

The latest federal rate increases have aggravated the ongoing market correction, and investor sentiment is very bearish across all sectors. Despite tightening monetary policies, high core inflation is raising the probability of a recession. Recently, the S&P 500 index sank to its lowest level since March 2021. And the fear of more stringent monetary policies soon is expected to keep the markets under pressure in the near term.

Though large-cap stocks tend to be dependable and offer stable returns during periods of market volatility, those that are overvalued, with weak fundamentals, may not be as beneficial. The bearish investor sentiment regarding large-cap stocks is evident in the Vanguard Mega Cap ETF’s (MGC) 18.5% loss year-to-date.

Given this backdrop, we think the overvalued large-cap stocks of Clorox Company (CLX), Consolidated Edison, Inc. (ED), Telefónica, S.A. (TEF), and Avis Budget Group, Inc. (CAR) are best avoided now.

Clorox Company (CLX)

CLX, a leading multinational manufacturer and marketer with about 9,000 employees worldwide, manufactures and markets consumer and professional products. The Oakland, Calif-based company operates through four segments: Health and Wellness; Household; Lifestyle; and International. Its market capitalization is $19.06 billion.

CLX’s net sales increased 1.6% year-over-year to $1.81 billion for the third quarter, ended March 31, 2022. However, its gross profit declined 16.1% year-over-year to $649 million. Its cash and cash equivalents came in at $241 million for the period ended March 31, 2022, compared to $492 million for the period ended March 31, 2021. Also, its total current assets were $1.87 billion, compared to $1.96 billion, for the same period.

In terms of forward EV/S, CLX’s 3.14x is 70.8% higher than the 1.84x industry average. Furthermore, its 2.68x forward P/S is 137.2% higher than the 1.13x industry average.

Analysts expect CLX’s revenue to decrease 2.3% to $7.17 billion in its fiscal 2022. Its EPS is estimated to decline 42.8% to $4.15 in 2022. It missed consensus EPS estimates in two of the trailing four quarters. The stock has declined 6.7%in price  over the past six months to close yesterday’s trading session at $154.86. Wall Street analysts expect the stock to hit $135.70 in the near term, which indicates a potential decline of 12.4%.

CLX’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It has a D grade for Sentiment. Click here to access the additional POWR Ratings for CLX (Value, Momentum, Growth, Stability, and Quality). It is ranked #33 of 61 stocks in the D-rated Consumer Goods industry.

Consolidated Edison, Inc. (ED)

New York City-based ED and its subsidiaries engage in the regulated electric, gas, and steam delivery businesses in the United States. The company owns, operates, and develops renewable and energy infrastructure projects, and provides energy-related products and services to wholesale and retail customers. Its market capitalization is $33.40 billion.

ED’s total operating revenues increased 10.4% year-over-year to $4.06 billion for the first quarter, ended March 31, 2022. However, ED’s operating income decreased 7.1% year-over-year to $799 million. Furthermore, its cash and temporary cash investments came in at $108 million for the period ended March 31, 2022, compared to $992 million for the period ended Dec. 31, 2021. Its total current assets came in at $5.46 billion, compared to $5.55 billion also for the same period.

In terms of forward non-GAAP P/E, ED’s 20.62x is 5% higher than the 19.65x industry average.

The stock missed EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 2.4% to close yesterday’s trading session at $94.28. Wall Street analysts expect the stock to hit $87.91 in price in the near term, which indicates a potential decline of 6.8%.

ED’s POWR Ratings reflect its poor prospects. The stock has a D grade for Sentiment.

We have also rated it for Growth, Value, Momentum, Stability, and Quality. Click here to access all the ED ratings. It is ranked #33 of 64 stocks in the D-rated Utilities – Domestic industry.

Telefónica, S.A. (TEF)

Headquartered in Madrid, Spain, TEF and its subsidiaries provide telecommunications services in Europe and Latin America. The company’s mobile and related services and products comprise mobile voice, value-added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. Its market capitalization is $27.66 billion.

On May 1, 2022, TEF announced its plan to increase investments in Israel’s high-tech sector in 2022. However, the company might not achieve immediate optimum returns on investment, given its inconsistent financials.

For the period ended Dec. 31, 2021, TEF’s revenues decreased 8.8% year-over-year to €39.28 billion ($41.11 billion). Its current assets came in at €24.93 billion ($26.09 billion) for the period ended Dec. 31, 2021, compared to €33.66 billion ($35.23 billion) for the period ended Dec. 31, 2020. In addition, its goodwill came in at €16.52 billion ($17.29 billion), compared to €17.04 billion ($17.84 billion), for the same period.

In terms of forward non-GAAP P/E, TEF’s 18.12x is 12.3% higher than the industry 16.14x average. Also, its 18.34x forward EV/EBIT is 26.9% higher than the 14.45x industry average.

Analysts expect TEF’s revenue to decrease 5.3% to $40.08 billion in 2022. Its EPS is estimated to decline  76.9% to $0.36 in 2022. Over the past month, the stock has declined 4.8% in price to close yesterday’s session at $4.78.

TEF’s POWR Ratings are consistent with this bleak outlook. It has an F grade for Growth.

We have graded TEF for Value, Stability, Momentum, Sentiment, and Quality. Click here to access all TEF’s ratings. It is ranked #29 of 47 stocks in the Telecom – Foreign industry.

Avis Budget Group, Inc. (CAR)

Parsippany, N.J.-based CAR provides car and truck rentals, car sharing, and ancillary products and services to businesses and consumers. It operates the Avis brand; the Budget Truck brand; and the Zipcar brand. The company also uses various other car rental brands. Its market capitalization is $10.79 billion.

CAR’s total expenses came in at $1.74 billion for the first quarter, ended March 31, 2022, up 7.1% year-over-year. Its debt under vehicle programs was  $12.10 billion for the period ended March 31, 2022, compared to $11.39 billion for the period ended Dec. 31, 2021. Furthermore,  its corporate debt came in at $4.71 billion compared to $4.01 billion for the same period.

CAR’s 2.61x forward EV/S is 66.5% higher than the 1.57x industry average.

CAR’s EPS is estimated to decline 24.1% to $18.80 in 2023. Over the past month, the stock has declined 12.9% to close yesterday’s trading session at $223.41.

CAR has a D grade for Stability. Click here to check additional ratings for CAR (Growth, Value, Momentum, Sentiment, and Quality). It is ranked #11 of 24 stocks in the Auto Dealers & Rentals industry.


CLX shares were trading at $156.15 per share on Thursday afternoon, up $1.29 (+0.83%). Year-to-date, CLX has declined -9.16%, versus a -17.25% rise in the benchmark S&P 500 index during the same period.


About the Author: Riddhima Chakraborty


Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...


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