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.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.
GoDaddy (GDDY)
Market cap: $14.35 billion
Known for its memorable Super Bowl commercials that put it on the map, GoDaddy (NYSE: GDDY) is a domain registrar and web services provider that helps entrepreneurs establish an online presence through domain registration, website building, hosting, and e-commerce tools.
Why Do We Think GDDY Will Underperform?
- Average bookings growth of 4.8% over the last year was mediocre and suggests fewer customers signed long-term contracts
- Estimated sales growth of 5.2% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 63.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $115 per share, GoDaddy trades at 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why GDDY doesn’t pass our bar.
Tractor Supply (TSCO)
Market cap: $19.06 billion
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Do We Think Twice About TSCO?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.3% for the last three years
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- 4.4 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
Tractor Supply is trading at $36.93 per share, or 17.4x forward P/E. Read our free research report to see why you should think twice about including TSCO in your portfolio.
Ryder (R)
Market cap: $10.82 billion
As one of the first companies to introduce the idea of leasing trucks, Ryder (NYSE: R) provides rental vehicles to businesses and delivers packages directly to homes or businesses.
Why Are We Wary of R?
- The company has faced growth challenges as its 2.4% annual revenue increases over the last two years fell short of other industrials companies
- Gross margin of 19.8% reflects its high production costs
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Ryder’s stock price of $283 implies a valuation ratio of 16.1x forward P/E. If you’re considering R for your portfolio, see our FREE research report to learn more.
High-quality stocks for all market conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
