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 is one mid-cap stock with huge upside potential and two best left ignored.
Two Mid-Cap Stocks to Sell:
Okta (OKTA)
Market Cap: $13.45 billion
Named after the meteorological measurement for cloud cover, Okta (NASDAQ: OKTA) provides cloud-based identity management solutions that help organizations securely connect their employees, partners, and customers to the right applications and services.
Why Is OKTA Not Exciting?
- Products, pricing, or go-to-market strategy may need some adjustments as its 9.8% average billings growth over the last year was weak
- Estimated sales growth of 9% for the next 12 months implies demand will slow from its two-year trend
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2 percentage points over the next year
Okta is trading at $76.54 per share, or 4.5x forward price-to-sales. If you’re considering OKTA for your portfolio, see our FREE research report to learn more.
Allison Transmission (ALSN)
Market Cap: $11.31 billion
Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Are We Hesitant About ALSN?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Flat earnings per share over the last two years underperformed the sector average
Allison Transmission’s stock price of $136.01 implies a valuation ratio of 14.6x forward P/E. To fully understand why you should be careful with ALSN, check out our full research report (it’s free).
One Mid-Cap Stock to Buy:
Instacart (CART)
Market Cap: $10.1 billion
Powering more than one billion grocery orders since its founding, Instacart (NASDAQ: CART) is an online grocery shopping and delivery platform that partners with retailers to help customers shop from local stores through its app or website.
Why Are We Backing CART?
- Prominent and differentiated platform results in a top-tier gross margin of 74.4%
- Highly efficient business model is illustrated by its impressive 27.7% EBITDA margin, and its profits increased over the last few years as it scaled
- Free cash flow margin jumped by 14.4 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $42.58 per share, Instacart trades at 8.7x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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