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. That said, here is one mid-cap stock with a long growth runway and two that could be down big.
Two Mid-Cap Stocks to Sell:
Okta (OKTA)
Market Cap: $26.22 billion
Named after the meteorological measurement for cloud cover, Okta (NASDAQ: OKTA) provides cloud-based identity management solutions that help organizations securely connect their employees, partners, and customers to the right applications and services.
Why Are We Cautious About OKTA?
- Offerings struggled to generate meaningful interest as its average billings growth of 10.8% over the last year did not impress
- Estimated sales growth of 9.1% for the next 12 months implies demand will slow from its two-year trend
- Operating margin improvement of 5.1 percentage points over the last year demonstrates its ability to scale efficiently
Okta is trading at $149.50 per share, or 8.4x forward price-to-sales. Read our free research report to see why you should think twice about including OKTA in your portfolio.
Performance Food Group (PFGC)
Market Cap: $17.34 billion
With a massive network spanning 155 distribution centers and delivering over 250,000 different food products, Performance Food Group (NYSE: PFGC) distributes food and food-related products to over 300,000 restaurants, convenience stores, theaters, and institutions across North America.
Why Should You Sell PFGC?
- Average unit sales growth of 6.6% over the past two years reflects steady demand for its products
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.2% for the last two years
- Improving returns on capital suggest management is identifying more profitable investments
Performance Food Group’s stock price of $110.41 implies a valuation ratio of 21.5x forward P/E. To fully understand why you should be careful with PFGC, check out our full research report (it’s free).
One Mid-Cap Stock to Buy:
Sterling (STRL)
Market Cap: $20.52 billion
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ: STRL) provides civil infrastructure construction.
Why Is STRL a Good Business?
- Annual revenue growth of 19.8% over the past two years was outstanding, reflecting market share gains this cycle
- STRL is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
- Returns on capital are climbing as management makes more lucrative bets
At $662.00 per share, Sterling trades at 34.3x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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