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.
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 a long growth runway and two that could be down big.
Two Mid-Cap Stocks to Sell:
U-Haul (UHAL)
Market Cap: $10.98 billion
Founded by a husband and wife duo, U-Haul (NYSE:UHAL) is a provider of rental trucks and storage facilities.
Why Is UHAL Risky?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 36.3 percentage points
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $63.01 per share, U-Haul trades at 2.1x trailing 12-month price-to-sales. Dive into our free research report to see why there are better opportunities than UHAL.
XPO (XPO)
Market Cap: $14.44 billion
Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE:XPO) is a transportation company specializing in expedited shipping services.
Why Do We Think XPO Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 10.7% annually over the last five years
- Earnings per share have dipped by 1.5% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.7 percentage points
XPO is trading at $122.56 per share, or 30.1x forward P/E. Read our free research report to see why you should think twice about including XPO in your portfolio.
One Mid-Cap Stock to Watch:
Ulta (ULTA)
Market Cap: $21.21 billion
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ:ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
Why Could ULTA Be a Winner?
- New store openings and solid same-store sales performance have boosted its top-line growth
- ULTA is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Industry-leading 31.2% return on capital demonstrates management’s skill in finding high-return investments, and its returns are climbing as it finds even more attractive growth opportunities
Ulta’s stock price of $467.38 implies a valuation ratio of 20x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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