3 Mid-Cap Stocks in the Doghouse
Many investors pay attention to mid-cap stocks because they have established business models and expansive market opportunities. However, their paths to becoming $100 billion corporations are ripe with competition, ranging from giants with vast resources to agile upstarts eager to disrupt the status quo.
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: $16.97 billion
One of China's largest restaurant companies, Yum China (NYSE:YUMC) is an independent entity spun off from Yum! Brands in 2016.
Why Does YUMC Worry Us?
Sizable revenue base leads to growth challenges as its 5.2% annual revenue increases over the last five years fell short of other restaurant companies
Anticipated sales growth of 5.3% for the next year implies demand will be shaky
Lacking pricing power results in an inferior gross margin of 18.6% that must be offset by turning more tables
Yum China is trading at $45.71 per share, or 17.6x forward price-to-earnings. Read our free research report to see why you should think twice about including YUMC in your portfolio, it's free.
Market Cap: $28.2 billion
One of the largest homebuilders in America, Lennar (NYSE:LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Steer Clear of LEN?
Demand cratered as it couldn't win new orders over the past two years, leading to an average 22.1% decline in its backlog
Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 10.8% annually
Free cash flow margin shrank by 13.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $107.13 per share, Lennar trades at 8.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than LEN.
Market Cap: $17.52 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 Twice About WSO?
Poor same-store sales performance over the past two years indicates it's having trouble bringing new shoppers into its stores
Revenue growth over the past two years was nullified by the company's new share issuances as its earnings per share fell by 5.4% annually
Diminishing returns on capital suggest its earlier profit pools are drying up
Watsco's stock price of $456.08 implies a valuation ratio of 30.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why WSO doesn't pass our bar.
The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
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