Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations. However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.
This is precisely where StockStory comes in – we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. That said, here is one mid-cap stock with huge upside potential and two best left ignored.
Two Mid-Cap Stocks to Sell:
Ralph Lauren (RL)
Market Cap: $22.61 billion
Originally founded as a necktie company, Ralph Lauren (NYSE:RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Do We Think RL Will Underperform?
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Weak constant currency growth over the past two years indicates challenges in maintaining its market share
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Subpar operating margin of 14.4% constrains its ability to invest in process improvements or effectively respond to new competitive threats
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Free cash flow margin is expected to remain in place over the coming year
Ralph Lauren’s stock price of $379.90 implies a valuation ratio of 20.2x forward P/E. To fully understand why you should be careful with RL, check out our full research report (it’s free).
Otis (OTIS)
Market Cap: $27.86 billion
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Are We Bearish on OTIS?
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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
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Projected sales growth of 4.2% for the next 12 months suggests sluggish demand
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Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.9% annually
Otis is trading at $72.82 per share, or 16.8x forward P/E. Check out our free in-depth research report to learn more about why OTIS doesn’t pass our bar.
One Mid-Cap Stock to Buy:
APA Corporation (APA)
Market Cap: $12.28 billion
Operating in three continents with a history stretching back to 1954, APA Corporation (NASDAQ:APA) explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the U.S., Egypt, and the U.K. North Sea.
Why Will APA Outperform?
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Solid 3.4% annual revenue growth over the last ten years indicates its offerings solve complex business issues
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Dominant market position is represented by its $8.15 billion in revenue and gives it fixed cost leverage when sales grow
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Strong free cash flow margin of 17.4% enables it to reinvest or return capital consistently
