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.
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 that may have trouble.
Two Mid-Cap Stocks to Sell:
Semtech (SMTC)
Market Cap: $12 billion
A public company since the late 1960s, Semtech (NASDAQ: SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Why Does SMTC Give Us Pause?
- Efficiency has decreased over the last five years as its operating margin fell by 19.2 percentage points
- Free cash flow margin dropped by 8.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Push for growth has led to negative returns on capital, signaling value destruction, and its shrinking returns suggest its past profit sources are losing steam
Semtech is trading at $128.43 per share, or 42.5x forward P/E. Check out our free in-depth research report to learn more about why SMTC doesn’t pass our bar.
Generac (GNRC)
Market Cap: $15.15 billion
With its name deriving from a combination of “generating” and “AC”, Generac (NYSE: GNRC) offers generators and other power products for residential, industrial, and commercial use.
Why Do We Think Twice About GNRC?
- Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
Generac’s stock price of $237.50 implies a valuation ratio of 25.7x forward P/E. Dive into our free research report to see why there are better opportunities than GNRC.
One Mid-Cap Stock to Buy:
Nextpower (NXT)
Market Cap: $17.98 billion
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dhabi solar farm project, Nextpower (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Why Are We Bullish on NXT?
- Annual revenue growth of 19.3% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow margin increased by 25.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Rising returns on capital show management is finding more attractive investment opportunities
At $110.19 per share, Nextpower trades at 23.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
