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 are three mid-cap stocks to pass on and some alternatives you should look into instead.
Domino's (DPZ)
Market Cap: $9.97 billion
Founded by two brothers in Michigan, Domino’s (NASDAQ: DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.
Why Are We Hesitant About DPZ?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales growth of 4.9% for the next 12 months is soft and implies weaker demand
- Free cash flow margin has stayed in place over the last year
At $302.78 per share, Domino's trades at 15.3x forward P/E. Read our free research report to see why you should think twice about including DPZ in your portfolio.
JLL (JLL)
Market Cap: $15.65 billion
Founded in 1999 through the merger of Jones Lang Wootton and LaSalle Partners, JLL (NYSE: JLL) is a company specializing in real estate advisory and investment management services.
Why Do We Think JLL Will Underperform?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 9.6% over the last five years was below our standards for the consumer discretionary sector
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.2% for the last two years
- Returns on capital haven’t budged, indicating management couldn’t drive additional value creation
JLL is trading at $340.93 per share, or 12.9x forward P/E. Dive into our free research report to see why there are better opportunities than JLL.
Fidelity National Financial (FNF)
Market Cap: $11.54 billion
Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE: FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.
Why Do We Steer Clear of FNF?
- 3.8% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
- Earnings per share fell by 5.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 2.1% annually over the last five years
Fidelity National Financial’s stock price of $43.38 implies a valuation ratio of 1.2x forward P/B. If you’re considering FNF for your portfolio, see our FREE research report to learn more.
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