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 avoid and some other investments you should consider instead.

Wayfair (W)

Market Cap: $11.38 billion

Founded in 2002 by Niraj Shah, Wayfair (NYSE: W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Do We Steer Clear of W?

1. Active Customers have declined by 1.7% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. Underwhelming performance in both user spending and platform engagement suggests its platform is becoming less effective
3. Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 30.3%

Wayfair is trading at $87.50 per share, or 21.6x forward EV/EBITDA. If you’re considering W for your portfolio, see our FREE research report to learn more.

Viatris (VTRS)

Market Cap: $11.19 billion

Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.

Why Do We Pass on VTRS?

1. Sales tumbled by 4.9% annually over the last two years, showing market trends are working against its favor during this cycle
2. Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 12% annually
3. Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam

Viatris’s stock price of $9.67 implies a valuation ratio of 4.2x forward P/E. Read our free research report to see why you should think twice about including VTRS in your portfolio.

Franklin Resources (BEN)

Market Cap: $12.65 billion

Operating under the widely recognized Franklin Templeton brand since 1947, Franklin Resources (NYSE: BEN) is a global investment management organization that offers financial services and solutions to individuals, institutions, and wealth advisors worldwide.

Why Should You Dump BEN?

1. Sales trends were unexciting over the last two years as its 2.3% annual growth was below the typical financials company
2. Earnings per share fell by 4.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. ROE of 8.5% reflects management’s challenges in identifying attractive investment opportunities

At $24.36 per share, Franklin Resources trades at 10.4x forward P/E. To fully understand why you should be careful with BEN, check out our full research report (it’s free).

Stocks We Like More

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