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.
Paramount (PSKY)
Market Cap: $11.74 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ: PSKY) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Do We Avoid PSKY?
- 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 2.1% for the last five years
- Projected 2.3 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its 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
At $9.99 per share, Paramount trades at 13.5x forward P/E. Read our free research report to see why you should think twice about including PSKY in your portfolio.
MGM Resorts (MGM)
Market Cap: $12.08 billion
Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE: MGM) is a global hospitality and entertainment company known for its resorts and casinos.
Why Should You Sell MGM?
- 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 3.1% for the last two years
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
MGM Resorts is trading at $47.08 per share, or 25.1x forward P/E. To fully understand why you should be careful with MGM, check out our full research report (it’s free).
Mettler-Toledo (MTD)
Market Cap: $23.06 billion
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE: MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Why Are We Cautious About MTD?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Anticipated sales growth of 4.8% for the next year implies demand will be shaky
- Diminishing returns on capital suggest its earlier profit pools are drying up
Mettler-Toledo’s stock price of $1,130 implies a valuation ratio of 24x forward P/E. Dive into our free research report to see why there are better opportunities than MTD.
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