1 Mid-Cap Stock for Long-Term Investors and 2 to Steer Clear Of

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.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one mid-cap stock with a long growth runway and two that could be down big.

Two Mid-Cap Stocks to Sell:

Toll Brothers (TOL)

Market Cap: $10.1 billion

Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.

Why Does TOL Give Us Pause?

1. Backlog has dropped by 2% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.4%
3. Free cash flow margin dropped by 8.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Toll Brothers is trading at $102.25 per share, or 6.9x forward P/E. To fully understand why you should be careful with TOL, check out our full research report (it’s free).

STERIS (STE)

Market Cap: $21.86 billion

With a mission critical role in preventing healthcare-associated infections, STERIS (NYSE:STE) provides infection prevention products, sterilization services, and medical equipment that help healthcare facilities and life science companies maintain sterile environments.

Why Is STE Not Exciting?

1. Adjusted operating margin failed to increase over the last two years, indicating the company couldn’t optimize its expenses
2. Free cash flow margin shrank by 1.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $222.45 per share, STERIS trades at 22.7x forward P/E. Dive into our free research report to see why there are better opportunities than STE.

One Mid-Cap Stock to Buy:

Pure Storage (PSTG)

Market Cap: $15.51 billion

Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE:PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.

Why Will PSTG Beat the Market?

1. ARR trends over the past two years show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Incremental sales over the last five years have been highly profitable as its earnings per share increased by 46.4% annually, topping its revenue gains
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety

Pure Storage’s stock price of $47.58 implies a valuation ratio of 26.9x 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

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.