Mid-cap stocks have the best odds of scaling into $100 billion corporations thanks to their tested business models and large addressable markets. But the many opportunities in front of them attract significant competition, spanning from industry behemoths with seemingly infinite resources to small, nimble players with chips on their shoulders.
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 avoid and some other investments you should consider instead.
Avery Dennison (AVY)
Market Cap: $12 billion
Founded as Kum Kleen Products, Avery Dennison (NYSE:AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.
Why Does AVY Worry Us?
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Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
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Estimated sales growth of 3.9% for the next 12 months is soft and implies weaker demand
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Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 4.3% annually
Avery Dennison is trading at $156.88 per share, or 15.3x forward P/E. Read our free research report to see why you should think twice about including AVY in your portfolio, it’s free.
Centene (CNC)
Market Cap: $28.75 billion
Serving nearly 1 in 15 Americans through its government healthcare programs, Centene (NYSE:CNC) is a healthcare company that manages government-sponsored health insurance programs like Medicaid and Medicare for low-income and complex-needs populations.
Why Are We Hesitant About CNC?
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Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
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Incremental sales over the last five years were much less profitable as its earnings per share fell by 15.2% annually while its revenue grew
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Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Centene’s stock price of $58.35 implies a valuation ratio of 16.1x forward P/E. To fully understand why you should be careful with CNC, check out our full research report (it’s free).
Regions Financial (RF)
Market Cap: $23.02 billion
Tracing its roots back to 1971 and operating in a region known as the “heart of Dixie,” Regions Financial (NYSE:RF) is a financial holding company that provides banking services, wealth management, and specialty financial solutions across the South, Midwest, and Texas.