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. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Market Cap: $17.09 billion
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Why Are We Cautious About BURL?
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Annual sales growth of 8% over the last six years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
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Free cash flow margin shrank by 6.5 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
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Underwhelming 9% return on capital reflects management’s difficulties in finding profitable growth opportunities
Burlington is trading at $274.98 per share, or 27.2x forward P/E. Read our free research report to see why you should think twice about including BURL in your portfolio, it’s free for active Edge members.
Market Cap: $18.92 billion
With a workforce of approximately 45,000 professionals tackling complex challenges from water scarcity to cybersecurity, Jacobs Solutions (NYSE:J) provides engineering, consulting, and technical services focused on infrastructure, sustainability, and advanced technology solutions.
Why Should You Dump J?
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Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.5% annually over the last five years
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Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
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Below-average returns on capital indicate management struggled to find compelling investment opportunities
Jacobs Solutions’s stock price of $158 implies a valuation ratio of 23.1x forward P/E. To fully understand why you should be careful with J, check out our full research report (it’s free for active Edge members).
Market Cap: $9.65 billion
With a history dating back to 1902 and roots in the McCann-Erickson agency, Interpublic Group (NYSE:IPG) is a marketing and communications holding company that owns agencies specializing in advertising, media buying, public relations, and digital marketing services.
