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. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Skyworks Solutions (SWKS)
Market Cap: $10.04 billion
Result of a merger of Alpha Industries and the wireless communications division of Conexant, Skyworks Solutions (NASDAQ: SWKS) is a designer and manufacturer of chips used in smartphones, autos, and industrial applications to amplify, filter, and process wireless signals.
Why Do We Steer Clear of SWKS?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.6% annually over the last two years
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Operating margin declined by 19 percentage points over the last five years as its sales cratered
Skyworks Solutions is trading at $66.88 per share, or 13.4x forward P/E. Read our free research report to see why you should think twice about including SWKS in your portfolio.
Hasbro (HAS)
Market Cap: $13.84 billion
Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ: HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.
Why Is HAS Risky?
- Annual sales declines of 3% for the past five years show its products and services struggled to connect with the market
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 8.1% annually
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $97.86 per share, Hasbro trades at 16.8x forward P/E. If you’re considering HAS for your portfolio, see our FREE research report to learn more.
CoStar (CSGP)
Market Cap: $13.38 billion
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Are We Hesitant About CSGP?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.6% annually while its revenue grew
- 17.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
CoStar’s stock price of $32.91 implies a valuation ratio of 23.9x forward P/E. Dive into our free research report to see why there are better opportunities than CSGP.
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