3 Mid-Cap Stocks in Hot Water

Many investors pay attention to mid-cap stocks because they have established business models and expansive market opportunities. However, their paths to becoming $100 billion corporations are ripe with competition, ranging from giants with vast resources to agile upstarts eager to disrupt the status quo.

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.

Hyatt Hotels (H)

Market Cap: $13.32 billion

Founded in 1957, Hyatt Hotels (NYSE:H) is a global hospitality company with a portfolio of 20 premier brands and over 950 properties across 65 countries.

Why Are We Out on H?

1. Weak revenue per room over the past two years indicates challenges in maintaining pricing power and occupancy rates
2. Estimated sales growth of 3.5% for the next 12 months implies demand will slow from its two-year trend
3. Negative returns on capital show that some of its growth strategies have backfired

Hyatt Hotels is trading at $140 per share, or 36.8x forward price-to-earnings. To fully understand why you should be careful with H, check out our full research report (it’s free).

Align Technology (ALGN)

Market Cap: $13.93 billion

Founded in 1997, Align Technology (NASDAQ:ALGN) specializes in clear aligner therapy and digital dental solutions, offering products like the Invisalign system for teeth straightening and iTero scanners for precise digital imaging.

Why Are We Wary of ALGN?

1. 3.5% annual revenue growth over the last two years was slower than its healthcare peers
2. Free cash flow margin shrank by 5.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Align Technology’s stock price of $188 implies a valuation ratio of 18.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ALGN.

Toll Brothers (TOL)

Market Cap: $11.46 billion

Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.

Why Are We Hesitant About TOL?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 2% declines over the past two years
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.4%
3. Free cash flow margin dropped by 8.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $115 per share, Toll Brothers trades at 7.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why TOL doesn’t pass our bar.

Stocks We Like More

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Take advantage of the rebound by checking out 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.