3 Mid-Cap Stocks We’re Skeptical Of

October 01, 2025 at 00:34 AM EDT

WMS Cover Image

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.

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 are three mid-cap stocks to swipe left on and some alternatives you should look into instead.

Advanced Drainage (WMS)

Market Cap: $10.78 billion

Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.

Why Does WMS Worry Us?

Sales stagnated over the last two years and signal the need for new growth strategies
Projected sales growth of 1.9% for the next 12 months suggests sluggish demand
Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

At $138.50 per share, Advanced Drainage trades at 23.8x forward P/E. Dive into our free research report to see why there are better opportunities than WMS.

Encompass Health (EHC)

Market Cap: $12.79 billion

With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE: EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.

Why Does EHC Fall Short?

Muted 4.3% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
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

Encompass Health’s stock price of $127.02 implies a valuation ratio of 24x forward P/E. Check out our free in-depth research report to learn more about why EHC doesn’t pass our bar.

Principal Financial Group (PFG)

Market Cap: $18.47 billion

Founded in 1879 by a Civil War veteran seeking to provide financial security for families, Principal Financial Group (NASDAQGS:PFG) provides retirement solutions, asset management, and employee benefits to businesses, individuals, and institutional clients globally.

Why Should You Sell PFG?

Customers postponed purchases of its products and services this cycle as its revenue declined by 1.1% annually over the last five years
1.8% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
Annual book value per share declines of 1.7% for the past five years show its capital management struggled during this cycle

Principal Financial Group is trading at $82.91 per share, or 1.6x forward P/B. If you’re considering PFG for your portfolio, see our FREE research report to learn more.

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3 Mid-Cap Stocks We’re Skeptical Of

Advanced Drainage (WMS)

Encompass Health (EHC)

Principal Financial Group (PFG)

High-Quality Stocks for All Market Conditions

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