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 massive growth potential and two that could be down big.
Two Mid-Cap Stocks to Sell:
Darden (DRI)
Market Cap: $23.38 billion
Founded in 1968 as Red Lobster, Darden (NYSE: DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Are We Wary of DRI?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.1% over the last seven years was below our standards for the restaurant sector
- Gross margin of 21.7% is below its competitors, leaving less money for marketing and promotions
- Earnings growth underperformed the sector average over the last seven years as its EPS grew by just 9% annually
At $204.51 per share, Darden trades at 17.9x forward P/E. To fully understand why you should be careful with DRI, check out our full research report (it’s free).
Unum Group (UNM)
Market Cap: $11.88 billion
Tracing its roots back to 1848 when financial security for workers was virtually non-existent, Unum Group (NYSE: UNM) provides workplace financial protection benefits including disability, life, accident, critical illness, dental and vision insurance primarily through employers.
Why Do We Avoid UNM?
- Outsized scale creates growth headwinds as its 2.9% annualized net premiums earned increases over the last five years underperformed other financial institutions
- Estimated sales decline of 4.9% for the next 12 months implies a challenging demand environment
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3% annually
Unum Group is trading at $73.13 per share, or 1x forward P/B. If you’re considering UNM for your portfolio, see our FREE research report to learn more.
One Mid-Cap Stock to Watch:
Nutanix (NTNX)
Market Cap: $10.47 billion
Originally pioneering hyperconverged infrastructure to break down traditional data center silos, Nutanix (NASDAQ: NTNX) provides a unified software platform that enables organizations to run applications and manage data across private, public, and hybrid cloud environments.
Why Does NTNX Stand Out?
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 87.1%
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Robust free cash flow margin of 28.9% gives it many options for capital deployment
Nutanix’s stock price of $39.59 implies a valuation ratio of 4x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
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