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 avoid and some other investments you should consider instead.
Wayfair (W)
Market Cap: $11.38 billion
Founded in 2002 by Niraj Shah, Wayfair (NYSE:W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.
Why Do We Steer Clear of W?
- Active Customers have declined by 1.7% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
- Underwhelming performance in both user spending and platform engagement suggests its platform is becoming less effective
- Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 30.3%
Wayfair is trading at $87.50 per share, or 21.6x forward EV/EBITDA. If you’re considering W for your portfolio, see our FREE research report to learn more.
Viatris (VTRS)
Market Cap: $11.19 billion
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ:VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Do We Pass on VTRS?
- Sales tumbled by 4.9% annually over the last two years, showing market trends are working against its favor during this cycle
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 12% annually
- Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam
Viatris’s stock price of $9.67 implies a valuation ratio of 4.2x forward P/E. Read our free research report to see why you should think twice about including VTRS in your portfolio.
Franklin Resources (BEN)
Market Cap: $12.65 billion
Operating under the widely recognized Franklin Templeton brand since 1947, Franklin Resources (NYSE:BEN) is a global investment management organization that offers financial services and solutions to individuals, institutions, and wealth advisors worldwide.
Why Should You Dump BEN?
- Sales trends were unexciting over the last two years as its 2.3% annual growth was below the typical financials company
- Earnings per share fell by 4.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- ROE of 8.5% reflects management’s challenges in identifying attractive investment opportunities
At $24.36 per share, Franklin Resources trades at 10.4x forward P/E. To fully understand why you should be careful with BEN, check out our full research report (it’s free).
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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