Mid-cap stocks have the best odds of scaling into $100 billion corporations thanks to their tested business models and large addressable markets. But the many opportunities in front of them attract significant competition, spanning from industry behemoths with seemingly infinite resources to small, nimble players with chips on their shoulders.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three mid-cap stocks to swipe left on and some alternatives you should look into instead.
Market Cap: $15.29 billion
Originally a manufacturing company, Watsco (NYSE:WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Why Do We Think WSO Will Underperform?
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Flat sales over the last two years suggest it must find different ways to grow during this cycle
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Issuance of new shares over the last two years caused its earnings per share to fall by 5.8% annually
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Eroding returns on capital suggest its historical profit centers are aging
Watsco’s stock price of $409.15 implies a valuation ratio of 32.5x forward P/E. If you’re considering WSO for your portfolio, see our FREE research report to learn more.
Market Cap: $10.6 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ:CAR) is a provider of car rental and mobility solutions.
Why Are We Wary of CAR?
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Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.5% annually over the last two years
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Diminishing returns on capital suggest its earlier profit pools are drying up
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Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $300.87 per share, Avis Budget Group trades at 79.7x forward P/E. Read our free research report to see why you should think twice about including CAR in your portfolio, it’s free.
Market Cap: $11.5 billion
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE:ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Are We Hesitant About ELAN?
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Annual revenue growth of 3.3% over the last two years was below our standards for the healthcare sector
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Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 3.3 percentage points
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Negative returns on capital show that some of its growth strategies have backfired
