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 is one mid-cap stock with huge upside potential and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Twilio (TWLO)
Market Cap: $15.28 billion
Founded in 2008 by Jeff Lawson, a former engineer at Amazon, Twilio (NYSE: TWLO) is a software as a service platform that makes it really easy for software developers to use text messaging, voice calls and other forms of communication in their apps.
Why Are We Cautious About TWLO?
- Products, pricing, or go-to-market strategy may need some adjustments as its 7.4% average billings growth over the last year was weak
- Estimated sales growth of 8% for the next 12 months implies demand will slow from its three-year trend
- Sky-high servicing costs result in an inferior gross margin of 51.1% that must be offset through higher consumption volumes
At $103.55 per share, Twilio trades at 3.2x forward price-to-sales. Check out our free in-depth research report to learn more about why TWLO doesn’t pass our bar.
Graco (GGG)
Market Cap: $14.38 billion
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Does GGG Give Us Pause?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.3% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
Graco is trading at $86.60 per share, or 27.6x forward price-to-earnings. If you’re considering GGG for your portfolio, see our FREE research report to learn more.
One Mid-Cap Stock to Watch:
Molina Healthcare (MOH)
Market Cap: $18.03 billion
Founded in 1980 as a clinic for underserved California residents, Molina Healthcare (NYSE: MOH) provides health insurance to individuals and families who are eligible for government-sponsored programs such as Medicare (elderly) and Medicaid (low-income).
Why Could MOH Be a Winner?
- Annual revenue growth of 19.3% over the last five years was superb and indicates its market share increased during this cycle
- Sizeable revenue base of $40.65 billion gives it economies of scale and favorable reimbursement terms with healthcare providers
- Earnings growth has easily exceeded the peer group average over the last five years as its EPS has compounded at 12.2% annually
Molina Healthcare’s stock price of $324.85 implies a valuation ratio of 12.5x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
