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3 Mid-Cap Stocks with Warning Signs

AKAM Cover Image

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.

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 swipe left on and some alternatives you should look into instead.

Akamai Technologies (AKAM)

Market Cap: $13.63 billion

With a massive distributed network spanning 4,100+ points of presence in nearly 130 countries, Akamai Technologies (NASDAQ: AKAM) provides a global distributed cloud platform that helps businesses deliver, secure, and optimize their digital experiences online.

Why Is AKAM Risky?

  1. 5.1% annual revenue growth over the last two years was slower than its software peers
  2. Gross margin of 59.1% is way below its competitors, leaving less money to invest in areas like marketing and R&D
  3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

At $94.78 per share, Akamai Technologies trades at 3.2x forward price-to-sales. If you’re considering AKAM for your portfolio, see our FREE research report to learn more.

Expeditors (EXPD)

Market Cap: $21.93 billion

Expeditors (NYSE: EXPD) offers air and ocean freight as well as brokerage services.

Why Does EXPD Fall Short?

  1. Annual sales growth of 3.3% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
  2. Gross margin of 13.4% reflects its high production costs
  3. Waning returns on capital imply its previous profit engines are losing steam

Expeditors’s stock price of $163.64 implies a valuation ratio of 28x forward P/E. Dive into our free research report to see why there are better opportunities than EXPD.

Align Technology (ALGN)

Market Cap: $13.81 billion

Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ: ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.

Why Are We Wary of ALGN?

  1. Annual revenue growth of 2.2% over the last two years was below our standards for the healthcare sector
  2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 5.3 percentage points
  3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Align Technology is trading at $192.60 per share, or 16.8x forward P/E. Read our free research report to see why you should think twice about including ALGN in your portfolio.

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