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.
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. Keeping that in mind, here are two mid-cap stocks with huge upside potential and one that could be down big.
One Mid-Cap Stock to Sell:
Tyson Foods (TSN)
Market Cap: $21.44 billion
Started as a simple trucking business, Tyson Foods (NYSE: TSN) is one of the world’s largest producers of chicken, beef, and pork.
Why Is TSN Risky?
- Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Gross margin of 7.1% is below its competitors, leaving less money to invest in areas like marketing and production facilities
- Performance over the past three years shows each sale was less profitable, as its earnings per share fell by 16.2% annually
Tyson Foods’s stock price of $61.11 implies a valuation ratio of 14.2x forward P/E. Read our free research report to see why you should think twice about including TSN in your portfolio.
Two Mid-Cap Stocks to Watch:
Leidos (LDOS)
Market Cap: $20.02 billion
Formed through the split of IT services company SAIC, Leidos (NYSE: LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.
Why Are We Positive On LDOS?
- Backlog has averaged 20.2% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
Leidos is trading at $159.02 per share, or 13.4x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Universal Health Services (UHS)
Market Cap: $11.36 billion
With a network spanning 39 states and three countries, Universal Health Services (NYSE: UHS) operates acute care hospitals and behavioral health facilities across the United States, United Kingdom, and Puerto Rico.
Why Do We Like UHS?
- $17.36 billion in revenue gives its scale, which leads to bargaining power with customers because there are few trusted alternatives
- Share buybacks catapulted its annual earnings per share growth to 14.3%, which outperformed its revenue gains over the last five years
- Free cash flow margin jumped by 4.7 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $189.35 per share, Universal Health Services trades at 8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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