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.
This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. Keeping that in mind, here are three mid-cap stocks to swipe left on and some alternatives you should look into instead.
International Paper (IP)
Market Cap: $19.63 billion
Established in 1898, International Paper (NYSE: IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.
Why Do We Think IP Will Underperform?
- Annual sales growth of 3.9% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.4 percentage points
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
International Paper is trading at $36.91 per share, or 21.9x forward P/E. Read our free research report to see why you should think twice about including IP in your portfolio.
Moderna (MRNA)
Market Cap: $20.66 billion
Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ: MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.
Why Should You Sell MRNA?
- Annual sales declines of 46.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 30.2% annually while its revenue grew
- Free cash flow margin dropped by 178.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $52.14 per share, Moderna trades at 9.6x forward price-to-sales. To fully understand why you should be careful with MRNA, check out our full research report (it’s free).
Reinsurance Group of America (RGA)
Market Cap: $13.85 billion
Operating behind the scenes of the insurance industry since 1973, Reinsurance Group of America (NYSE: RGA) provides life and health reinsurance services to insurance companies, helping them manage risk and meet regulatory requirements.
Why Does RGA Fall Short?
- Net premiums earned only expanded by 6.9% annually over the last two years, trailing its insurance peers as its scale limited incremental business
- Flat book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
- Book value per share is projected to decrease by 11.8% over the next 12 months as capital generation weakens
Reinsurance Group of America’s stock price of $211.32 implies a valuation ratio of 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than RGA.
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