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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one mid-cap stock with a long growth runway and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Williams-Sonoma (WSM)
Market Cap: $23.1 billion
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Does WSM Worry Us?
- Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales growth of 1.7% for the next 12 months implies demand will slow from its five-year trend
Williams-Sonoma’s stock price of $187.62 implies a valuation ratio of 23.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than WSM.
Darden (DRI)
Market Cap: $22.8 billion
Founded in 1968 as Red Lobster, Darden (NYSE:DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Do We Think Twice About DRI?
- Annual sales growth of 6% over the last five years lagged behind its restaurant peers as its large revenue base made it difficult to generate incremental demand
- Lacking pricing power results in an inferior gross margin of 21.1% that must be offset by turning more tables
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 8.3% annually
At $194.47 per share, Darden trades at 19.7x forward price-to-earnings. To fully understand why you should be careful with DRI, check out our full research report (it’s free).
One Mid-Cap Stock to Watch:
Tenet Healthcare (THC)
Market Cap: $11.99 billion
Founded in 1967 as a small hospital operator, Tenet Healthcare (NYSE:THC) is a large hospital, surgical center, and outpatient facility operator today.
Why Do We Like THC?
- Share repurchases over the last five years enabled its annual earnings per share growth of 34.7% to outpace its revenue gains
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
Tenet Healthcare is trading at $126.02 per share, or 11.4x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.
Get started by checking out our Top 6 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.