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. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Constellation Brands (STZ)
Market Cap: $24.01 billion
With a presence in more than 100 countries, Constellation Brands (NYSE: STZ) is a globally renowned producer and marketer of beer, wine, and spirits.
Why Are We Hesitant About STZ?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Sales are projected to tank by 6.3% over the next 12 months as demand evaporates further
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
At $138.12 per share, Constellation Brands trades at 11.6x forward P/E. Check out our free in-depth research report to learn more about why STZ doesn’t pass our bar.
Hyatt Hotels (H)
Market Cap: $15.22 billion
Founded in 1957, Hyatt Hotels (NYSE: H) is a global hospitality company with a portfolio of 20 premier brands and over 950 properties across 65 countries.
Why Do We Steer Clear of H?
- Softer revenue per room over the past two years suggests it might have to invest in new amenities such as restaurants and bars to attract customers
- Poor expense management has led to an operating margin of 4.8% that is below the industry average
- Low free cash flow margin of 5.1% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Hyatt Hotels is trading at $159.95 per share, or 49.9x forward P/E. If you’re considering H for your portfolio, see our FREE research report to learn more.
T. Rowe Price (TROW)
Market Cap: $22.34 billion
Founded in 1937 by Thomas Rowe Price Jr., who pioneered the growth stock investing approach, T. Rowe Price (NASDAQ: TROW) is an investment management firm that offers mutual funds, advisory services, and retirement planning solutions to individuals and institutions.
Why Are We Cautious About TROW?
- Annual revenue growth of 4.2% over the last five years was below our standards for the financials sector
- Annual earnings per share growth of 1.5% underperformed its revenue over the last five years, showing its incremental sales were less profitable
T. Rowe Price’s stock price of $104.02 implies a valuation ratio of 10x forward P/E. Dive into our free research report to see why there are better opportunities than TROW.
High-Quality Stocks for All Market Conditions
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