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.
This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. That said, here are three mid-cap stocks to avoid and some other investments you should consider instead.
IDEX (IEX)
Market Cap: $13.58 billion
Founded in 1988, IDEX (NYSE:IEX) is a global manufacturer specializing in highly engineered products such as pumps, flow meters, and fluidics systems for various industries.
Why Do We Think IEX Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Free cash flow margin shrank by 5.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Diminishing returns on capital suggest its earlier profit pools are drying up
IDEX’s stock price of $179.77 implies a valuation ratio of 21.5x forward P/E. Check out our free in-depth research report to learn more about why IEX doesn’t pass our bar.
Fortive (FTV)
Market Cap: $17.1 billion
Taking its name from the Latin root of "strong", Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.
Why Should You Dump FTV?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Anticipated sales growth of 1.9% for the next year implies demand will be shaky
- Underwhelming 5.4% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
At $50.11 per share, Fortive trades at 12.3x forward P/E. To fully understand why you should be careful with FTV, check out our full research report (it’s free).
Principal Financial Group (PFG)
Market Cap: $17.89 billion
Founded in 1879 by a Civil War veteran seeking to provide financial security for families, Principal Financial Group (NASDAQGS:PFG) provides retirement solutions, asset management, and employee benefits to businesses, individuals, and institutional clients globally.
Why Are We Out on PFG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.5% annually over the last five years
- Expenses have increased as a percentage of revenue over the last two years as its pre-tax profit margin fell by 31.6 percentage points
- Annual earnings per share growth of 4.6% underperformed its revenue over the last two years, showing its incremental sales were less profitable
Principal Financial Group is trading at $79.90 per share, or 1.5x forward P/B. If you’re considering PFG for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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 Exlservice (+354% 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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