Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations. However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.
These dynamics can rattle even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Okta (OKTA)
Market Cap: $16.35 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 Wary of OKTA?
- 20% annual revenue growth over the last three years was slower than its software peers
- Estimated sales growth of 8.7% for the next 12 months implies demand will slow from its three-year trend
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3.8 percentage points
Okta is trading at $92.60 per share, or 5.6x forward price-to-sales. If you’re considering OKTA for your portfolio, see our FREE research report to learn more.
Warner Music Group (WMG)
Market Cap: $17.38 billion
Launching the careers of legendary artists like Frank Sinatra, Warner Music Group (NASDAQ: WMG) is a music company managing a diverse portfolio of artists, recordings, and music publishing services worldwide.
Why Does WMG Give Us Pause?
- 4.3% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Anticipated sales growth of 4.9% for the next year implies demand will be shaky
- Underwhelming 14.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $32.84 per share, Warner Music Group trades at 26.2x forward P/E. Dive into our free research report to see why there are better opportunities than WMG.
West Pharmaceutical Services (WST)
Market Cap: $17.76 billion
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Are We Cautious About WST?
- 1.6% annual revenue growth over the last two years was slower than its healthcare peers
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 3.9 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
West Pharmaceutical Services’s stock price of $246.95 implies a valuation ratio of 36.8x forward P/E. Check out our free in-depth research report to learn more about why WST doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
