3 Mid-Cap Stocks with Warning Signs

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.

WESCO (WCC)

Market Cap: $13.1 billion

Based in Pittsburgh, WESCO (NYSE:WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.

Why Is WCC Not Exciting?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Low free cash flow margin of 1.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

WESCO’s stock price of $269.28 implies a valuation ratio of 17x forward P/E. To fully understand why you should be careful with WCC, check out our full research report (it’s free).

American Airlines (AAL)

Market Cap: $10.55 billion

One of the ‘Big Four’ airlines in the US, American Airlines (NASDAQ:AAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.

Why Do We Pass on AAL?

1. Performance surrounding its revenue passenger miles has lagged its peers
2. Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $15.99 per share, American Airlines trades at 9.4x forward P/E. If you’re considering AAL for your portfolio, see our FREE research report to learn more.

HP (HPQ)

Market Cap: $19.71 billion

Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE:HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.

Why Are We Out on HPQ?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 2.8% annually while its revenue grew
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.1 percentage points

HP is trading at $21.42 per share, or 7x forward P/E. Check out our free in-depth research report to learn more about why HPQ doesn’t pass our bar.

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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.