3 mid-cap stocks with questionable fundamentals

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 are three mid-cap stocks to pass on and some alternatives you should look into instead.

General Mills (GIS)

Market Cap: $18.81 billion

Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE:GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.

Why Do We Think GIS Will Underperform?

1. Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy

2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment

3. Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs

At $35.14 per share, General Mills trades at 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than GIS.

Otis (OTIS)

Market Cap: $28.78 billion

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.

Why Do We Steer Clear of OTIS?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Anticipated sales growth of 4.2% for the next year implies demand will be shaky

3. Earnings per share lagged its peers over the last two years as they only grew by 2.9% annually

Otis is trading at $74.65 per share, or 17.2x forward P/E. Read our free research report to see why you should think twice about including OTIS in your portfolio, it’s free.

Stanley Black & Decker (SWK)

Market Cap: $14.95 billion

With an iconic “STANLEY” logo which has remained virtually unchanged for over a century, Stanley Black & Decker (NYSE:SWK) is a manufacturer primarily catering to the tool and outdoor equipment industry.

Why Are We Bearish on SWK?

1. 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

2. Projected sales for the next 12 months are flat and suggest demand will be subdued

3. Earnings per share have contracted by 15.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance