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. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.

Brown-Forman (BF.B)

Market Cap: $12.63 billion

Best known for its Jack Daniel’s whiskey, Brown-Forman (NYSE: BF.B) is an alcoholic beverage company with a broad portfolio of brands in wines and spirits.

Why Does BF.B Worry Us?

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. Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs

Brown-Forman is trading at $27.00 per share, or 15.6x forward P/E. To fully understand why you should be careful with BF.B, check out our full research report (it’s free).

Quest (DGX)

Market Cap: $20.78 billion

Processing approximately one-third of the adult U.S. population's lab tests annually, Quest Diagnostics (NYSE: DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.

Why Are We Wary of DGX?

1. Sizable revenue base leads to growth challenges as its 5.3% annual revenue increases over the last five years fell short of other healthcare companies
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 9.7 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Quest’s stock price of $186.81 implies a valuation ratio of 17.7x forward P/E. If you’re considering DGX for your portfolio, see our FREE research report to learn more.

Bunge Global (BG)

Market Cap: $20.4 billion

With origins dating back to 1818 and operations spanning both hemispheres to balance seasonal harvests, Bunge Global (NYSE: BG) is an agribusiness and food company that processes oilseeds, grains, and other agricultural commodities into vegetable oils, protein meals, flours, and specialty ingredients.

Why Are We Cautious About BG?

1. Annual sales declines of 3.7% for the past three years show its products struggled to connect with the market
2. Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 19% annually, worse than its revenue
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $106.04 per share, Bunge Global trades at 12.8x forward P/E. Dive into our free research report to see why there are better opportunities than BG.

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