Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations. However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three mid-cap stocks to pass on and some alternatives you should look into instead.
Bentley Systems (BSY)
Market cap: $12.36 billion
Pioneering the concept of "digital twins" for infrastructure projects long before it became an industry buzzword, Bentley Systems (NASDAQ: BSY) provides software solutions that help engineers design, build, and operate infrastructure projects across sectors including roads, bridges, utilities, mining, and industrial facilities.
Why Are We Cautious About BSY?
- ARR growth averaged a weak 12.3% over the last year, suggesting that competition is pulling some attention away from its software
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 11.2%
- Static operating margin over the last year shows it couldn’t become more efficient
Bentley Systems is trading at $39.85 per share, or 7.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BSY.
CooperCompanies (COO)
Market cap: $11.63 billion
With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ: COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.
Why Does COO Give Us Pause?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
- ROIC of 4.7% reflects management’s challenges in identifying attractive investment opportunities
At $61.15 per share, CooperCompanies trades at 13.4x forward P/E. Check out our free in-depth research report to learn more about why COO doesn’t pass our bar.
CNA Financial (CNA)
Market cap: $13.12 billion
With roots dating back to 1853 and majority ownership by Loews Corporation, CNA Financial (NYSE: CNA) is a commercial property and casualty insurance provider offering coverage for businesses, including professional liability, surety bonds, and specialized risk management services.
Why Do We Think CNA Will Underperform?
- Scale presents growth limitations compared to smaller competitors, evidenced by its below-average 6% annualized growth in net premiums earned for the last two years
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 2.1% annually while its revenue grew
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 2.4% annually over the last five years
CNA Financial’s stock price of $48.50 implies a valuation ratio of 10.6x forward P/E. Read our free research report to see why you should think twice about including CNA in your portfolio.
Stocks we like more
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