Mid-cap stocks have the best odds of scaling into $100 billion corporations thanks to their tested business models and large addressable markets. But the many opportunities in front of them attract significant competition, spanning from industry behemoths with seemingly infinite resources to small, nimble players with chips on their shoulders.
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. That said, here is one mid-cap stock with huge upside potential and two that could be down big.
Two Mid-Cap Stocks to Sell:
Align Technology (ALGN)
Market Cap: $13.05 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 Does ALGN Fall Short?
- Weak clear aligner shipments over the past two years imply it may need to invest in improvements to get back on track
- Free cash flow margin dropped by 7.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Waning returns on capital imply its previous profit engines are losing steam
Align Technology’s stock price of $179.99 implies a valuation ratio of 17.6x forward P/E. Read our free research report to see why you should think twice about including ALGN in your portfolio.
Encompass Health (EHC)
Market Cap: $12.22 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 Do We Think Twice About EHC?
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 4 percentage points
- Free cash flow margin shrank by 2.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $123.97 per share, Encompass Health trades at 24.7x forward P/E. Check out our free in-depth research report to learn more about why EHC doesn’t pass our bar.
One Mid-Cap Stock to Buy:
Reddit (RDDT)
Market Cap: $21.81 billion
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE: RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Why Should You Buy RDDT?
- Domestic Daily Active Visitors are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Earnings per share grew by 31.6% annually over the last three years, massively outpacing its peers
- Free cash flow margin increased by 38.9 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Reddit is trading at $117.82 per share, or 38.2x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
