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.
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 is one mid-cap stock with a long growth runway and two best left ignored.
Two Mid-Cap Stocks to Sell:
Williams-Sonoma (WSM)
Market Cap: $25.76 billion
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Does WSM Fall Short?
- Products aren’t resonating with the market as its revenue declined by 2.6% annually over the last three years
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 2% over the past two years
Williams-Sonoma’s stock price of $225.28 implies a valuation ratio of 23.9x forward P/E. Read our free research report to see why you should think twice about including WSM in your portfolio.
Darden (DRI)
Market Cap: $24.15 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 Hesitant About DRI?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.5% over the last seven years was below our standards for the restaurant sector
- Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its seven-year trend
- Challenging supply chain dynamics and bad unit economics are reflected in its low gross margin of 21.8%
At $204.30 per share, Darden trades at 17.7x forward P/E. Check out our free in-depth research report to learn more about why DRI doesn’t pass our bar.
One Mid-Cap Stock to Watch:
Incyte (INCY)
Market Cap: $21.54 billion
Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ: INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.
Why Could INCY Be a Winner?
- Impressive 19.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 19.4% to outpace its revenue gains
- Free cash flow margin increased by 8 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Incyte is trading at $116.43 per share, or 14.3x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
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