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. That said, here is one mid-cap stock with massive growth potential and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Equitable Holdings (EQH)
Market Cap: $11.77 billion
Tracing its roots back to 1859 as one of America’s oldest financial institutions, Equitable Holdings (NYSE:EQH) provides retirement planning, asset management, and life insurance products through its two main franchises, Equitable and AllianceBernstein.
Why Do We Think EQH Will Underperform?
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Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.2% for the last five years
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Efficiency has decreased over the last two years as its pre-tax profit margin fell by 13.3 percentage points
Equitable Holdings is trading at $41.90 per share, or 5.8x forward P/E. Check out our free in-depth research report to learn more about why EQH doesn’t pass our bar.
US Foods (USFD)
Market Cap: $19.78 billion
With a fleet of over 6,500 trucks delivering everything from fresh produce to frozen entrées, US Foods (NYSE:USFD) is a major foodservice distributor that supplies food products and services to approximately 250,000 restaurants, healthcare facilities, hotels, and educational institutions across the United States.
Why Do We Avoid USFD?
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Average unit sales growth of 2.8% over the past two years reflects steady demand for its products
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Subpar operating margin of 3% constrains its ability to invest in process improvements or effectively respond to new competitive threats
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Low free cash flow margin of 2.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $89.80 per share, US Foods trades at 18.9x forward P/E. To fully understand why you should be careful with USFD, check out our full research report (it’s free).
One Mid-Cap Stock to Buy:
Rollins (ROL)
Market Cap: $26.26 billion
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE:ROL) provides pest and wildlife control services to residential and commercial customers.