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. That said, here is one mid-cap stock with massive growth potential and two that could be down big.
Two Mid-Cap Stocks to Sell:
International Paper (IP)
Market Cap: $25.81 billion
Established in 1898, International Paper (NYSE: IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.
Why Do We Pass on IP?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- 11.6 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
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $48.89 per share, International Paper trades at 16.3x forward P/E. Dive into our free research report to see why there are better opportunities than IP.
Affirm (AFRM)
Market Cap: $25.64 billion
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Do We Think Twice About AFRM?
- Push for growth has led to negative returns on capital, signaling value destruction
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Affirm’s stock price of $79.98 implies a valuation ratio of 37.8x forward P/E. Check out our free in-depth research report to learn more about why AFRM doesn’t pass our bar.
One Mid-Cap Stock to Watch:
Incyte (INCY)
Market Cap: $16.61 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 Are We Fans of INCY?
- 14.2% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin increased by 6.2 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Incyte is trading at $85.44 per share, or 13.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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