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.
These dynamics can rattle even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Twilio (TWLO)
Market Cap: $20.08 billion
Known for the clever "Twilio Magic" demo that had developers creating functioning communications apps in minutes, Twilio (NYSE: TWLO) provides a platform that enables businesses to communicate with their customers through voice, messaging, email, and other digital channels.
Why Does TWLO Fall Short?
- Products, pricing, or go-to-market strategy may need some adjustments as its 13.4% average billings growth over the last year was weak
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 49%, one of the worst among software companies
Twilio is trading at $134.90 per share, or 3.5x forward price-to-sales. Read our free research report to see why you should think twice about including TWLO in your portfolio.
Williams-Sonoma (WSM)
Market Cap: $21.41 billion
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Does WSM Worry Us?
- Annual revenue declines of 3.5% over the last three years indicate problems with its market positioning
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
Williams-Sonoma’s stock price of $187.50 implies a valuation ratio of 19.7x forward P/E. Check out our free in-depth research report to learn more about why WSM doesn’t pass our bar.
Restaurant Brands (QSR)
Market Cap: $26.51 billion
Formed through a strategic merger, Restaurant Brands International (NYSE: QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Why Are We Wary of QSR?
- Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its six-year trend
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 5.4 percentage points
- Performance over the past six years shows its incremental sales were less profitable, as its 5.1% annual earnings per share growth trailed its revenue gains
At $77.65 per share, Restaurant Brands trades at 19x forward P/E. If you’re considering QSR for your portfolio, see our FREE research report to learn more.
Stocks We Like 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.
