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.
These dynamics can rattle even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here is one mid-cap stock with massive growth potential and two best left ignored.
Two Mid-Cap Stocks to Sell:
Entegris (ENTG)
Market Cap: $20.58 billion
With fabs representing the company’s largest customer type, Entegris (NASDAQ: ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Why Does ENTG Worry Us?
- Sales tumbled by 4.8% annually over the last two years, showing market trends are working against its favor during this cycle
- Projected sales growth of 7.2% for the next 12 months suggests sluggish demand
- Poor free cash flow margin of 11.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Entegris is trading at $135.85 per share, or 38.9x forward P/E. Check out our free in-depth research report to learn more about why ENTG doesn’t pass our bar.
Paramount (PSKY)
Market Cap: $11.97 billion
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ: PSKY) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Are We Out on PSKY?
- The company has faced growth challenges as its 2.7% annual revenue increases over the last five years fell short of other consumer discretionary companies
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.7 percentage points over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Paramount’s stock price of $10.58 implies a valuation ratio of 13.6x forward P/E. Read our free research report to see why you should think twice about including PSKY in your portfolio.
One Mid-Cap Stock to Watch:
Medpace (MEDP)
Market Cap: $14.09 billion
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Why Does MEDP Catch Our Eye?
- Average organic revenue growth of 15.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 31.7% exceeded its revenue gains over the last five years
- Free cash flow margin expanded by 6.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $493.67 per share, Medpace trades at 28.8x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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