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.

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.

Burlington (BURL)

Market Cap: $17.09 billion

Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE: BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.

Why Are We Cautious About BURL?

1. Annual sales growth of 8% over the last six years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. Free cash flow margin shrank by 6.5 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
3. Underwhelming 9% return on capital reflects management’s difficulties in finding profitable growth opportunities

Burlington is trading at $274.98 per share, or 27.2x forward P/E. If you’re considering BURL for your portfolio, see our FREE research report to learn more.

Jacobs Solutions (J)

Market Cap: $18.92 billion

With a workforce of approximately 45,000 professionals tackling complex challenges from water scarcity to cybersecurity, Jacobs Solutions (NYSE: J) provides engineering, consulting, and technical services focused on infrastructure, sustainability, and advanced technology solutions.

Why Should You Dump J?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.5% annually over the last five years
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Jacobs Solutions’s stock price of $158 implies a valuation ratio of 23.1x forward P/E. Read our free research report to see why you should think twice about including J in your portfolio.

Interpublic Group (IPG)

Market Cap: $9.65 billion

With a history dating back to 1902 and roots in the McCann-Erickson agency, Interpublic Group (NYSE: IPG) is a marketing and communications holding company that owns agencies specializing in advertising, media buying, public relations, and digital marketing services.

Why Are We Out on IPG?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Estimated sales for the next 12 months are flat and imply a softer demand environment
3. 17.1 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

At $26.35 per share, Interpublic Group trades at 8.9x forward P/E. Dive into our free research report to see why there are better opportunities than IPG.

Stocks We Like More

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