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.
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 is one mid-cap stock with huge upside potential and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Watsco (WSO)
Market Cap: $13.88 billion
Originally a manufacturing company, Watsco (NYSE:WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Why Is WSO Not Exciting?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Issuance of new shares over the last two years caused its earnings per share to fall by 2.2% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
At $366.84 per share, Watsco trades at 26.3x forward P/E. If you’re considering WSO for your portfolio, see our FREE research report to learn more.
IDEX (IEX)
Market Cap: $12.29 billion
Founded in 1988, IDEX (NYSE:IEX) is a global manufacturer specializing in highly engineered products such as pumps, flow meters, and fluidics systems for various industries.
Why Is IEX Risky?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 4% annually
- Eroding returns on capital suggest its historical profit centers are aging
IDEX’s stock price of $163.19 implies a valuation ratio of 19.9x forward P/E. To fully understand why you should be careful with IEX, check out our full research report (it’s free for active Edge members).
One Mid-Cap Stock to Buy:
Houlihan Lokey (HLI)
Market Cap: $13.56 billion
Founded in 1972 and known for its expertise in complex financial situations, Houlihan Lokey (NYSE:HLI) is a global investment bank specializing in mergers and acquisitions, capital markets, financial restructurings, and valuation advisory services.
Why Are We Backing HLI?
- Annual revenue growth of 17.2% over the last five years was superb and indicates its market share increased during this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 29% outpaced its revenue gains
- Impressive 43.7% annual tangible book value per share growth over the last two years indicates it’s building equity value this cycle
Houlihan Lokey is trading at $192.79 per share, or 25.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-micro-cap company Kadant (+351% 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.