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.
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 are three mid-cap stocks to pass on and some alternatives you should look into instead.
General Mills (GIS)
Market Cap: $18.81 billion
Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.
Why Do We Think GIS Will Underperform?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
At $35.14 per share, General Mills trades at 10.5x forward P/E. To fully understand why you should be careful with GIS, check out our full research report (it’s free).
Otis (OTIS)
Market Cap: $28.78 billion
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE: OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Do We Steer Clear of OTIS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Anticipated sales growth of 4.2% for the next year implies demand will be shaky
- Earnings per share lagged its peers over the last two years as they only grew by 2.9% annually
Otis is trading at $74.65 per share, or 17.2x forward P/E. Read our free research report to see why you should think twice about including OTIS in your portfolio.
Stanley Black & Decker (SWK)
Market Cap: $14.95 billion
With an iconic “STANLEY” logo which has remained virtually unchanged for over a century, Stanley Black & Decker (NYSE: SWK) is a manufacturer primarily catering to the tool and outdoor equipment industry.
Why Are We Bearish on SWK?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Earnings per share have contracted by 15.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
Stanley Black & Decker’s stock price of $98.75 implies a valuation ratio of 16.5x forward P/E. If you’re considering SWK for your portfolio, see our FREE research report to learn more.
Stocks we like more
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