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.
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 is one mid-cap stock with a long growth runway and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Guidewire (GWRE)
Market Cap: $19.82 billion
Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE:GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Why Does GWRE Give Us Pause?
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Annual revenue growth of 12.6% over the last three years was below our standards for the software sector
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High servicing costs result in a relatively inferior gross margin of 61.9% that must be offset through increased usage
At $235.40 per share, Guidewire trades at 15.5x forward price-to-sales. Check out our free in-depth research report to learn more about why GWRE doesn’t pass our bar.
Rocket Lab (RKLB)
Market Cap: $16.33 billion
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ:RKLB) offers rockets designed for launching small satellites.
Why Does RKLB Fall Short?
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Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
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Negative free cash flow raises questions about the return timeline for its investments
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Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Rocket Lab’s stock price of $35.23 implies a valuation ratio of 28.4x forward price-to-sales. To fully understand why you should be careful with RKLB, check out our full research report (it’s free).
One Mid-Cap Stock to Buy:
Lululemon (LULU)
Market Cap: $28.17 billion
Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.
Why Is LULU a Top Pick?
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Locations open for at least a year are seeing increased demand as same-store sales have averaged 6.6% growth over the past two years
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Unique assortment of products and pricing power are reflected in its best-in-class gross margin of 58.9%
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Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Lululemon is trading at $235.10 per share, or 15.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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
Selecting just one mid-cap stock to pass down for decades while questioning the investment logic behind owning two specific stocks highlights both strategic selections and potential blind spots within investors' portfolios.
An interesting observation on long-term investment horizons, where one midcap stock is poised to be a staple in portfolios for decades and two others call into question their sustainability over the same period of time.
Emerging economic scenarios and shifting industry dynamics have undoubtedly made the decision to hold 1 mid-cap stock for decades a prudent choice while keeping an objective eye on investment potential, thus making two other choices worth careful question.
