3 Mid-Cap Stocks We Keep Off Our Radar

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.

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. That said, here are three mid-cap stocks to avoid and some other investments you should consider instead.

Dollar Tree (DLTR)

Market Cap: $24.23 billion

A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.

Why Does DLTR Worry Us?

1. 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 1.1% for the last six years
2. Projected sales decline of 21.7% for the next 12 months points to a tough demand environment ahead
3. ROIC of 9.8% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging

Dollar Tree is trading at $116.50 per share, or 21.5x forward P/E. If you’re considering DLTR for your portfolio, see our FREE research report to learn more.

Generac (GNRC)

Market Cap: $11.51 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 Does GNRC Fall Short?

1. 4.7% annual revenue growth over the last two years was slower than its industrials peers
2. Free cash flow margin dropped by 6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Generac’s stock price of $197.52 implies a valuation ratio of 24.2x forward P/E. Dive into our free research report to see why there are better opportunities than GNRC.

Solventum (SOLV)

Market Cap: $12.72 billion

Founded in 1985, Solventum (NYSE:SOLV) develops, manufactures, and commercializes a portfolio of healthcare products and services addressing critical customer and therapeutic patient needs.

Why Are We Hesitant About SOLV?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Costs have risen faster than its revenue over the last four years, causing its adjusted operating margin to decline by 5.3 percentage points
3. Free cash flow margin shrank by 15.7 percentage points over the last four years, suggesting the company is consuming more capital to stay competitive

At $73.39 per share, Solventum trades at 13x forward P/E. Check out our free in-depth research report to learn more about why SOLV doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.