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 swipe left on and some alternatives you should look into instead.
CACI (CACI)
Market Cap: $11.03 billion
Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Why Is CACI Not Exciting?
- 3.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $499.41 per share, CACI trades at 16.6x forward P/E. Check out our free in-depth research report to learn more about why CACI doesn’t pass our bar.
TopBuild (BLD)
Market Cap: $12.3 billion
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
Why Does BLD Fall Short?
- Muted 3.9% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
TopBuild’s stock price of $438.75 implies a valuation ratio of 22.7x forward P/E. To fully understand why you should be careful with BLD, check out our full research report (it’s free).
Align Technology (ALGN)
Market Cap: $12.46 billion
Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ:ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.
Why Are We Hesitant About ALGN?
- Annual revenue growth of 2.3% over the last two years was below our standards for the healthcare sector
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 3.6 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Align Technology is trading at $174.10 per share, or 14.8x forward P/E. Dive into our free research report to see why there are better opportunities than ALGN.
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