Mid-cap stocks have the best odds of scaling into $100 billion corporations thanks to their tested business models and large addressable markets. But the many opportunities in front of them attract significant competition, spanning from industry behemoths with seemingly infinite resources to small, nimble players with chips on their shoulders.
This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. That said, here are three mid-cap stocks to avoid and some other investments you should consider instead.
Zillow (ZG)
Market Cap: $16.33 billion
Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.
Why Do We Think ZG Will Underperform?
- Products and services have few die-hard fans as sales have declined by 7.6% annually over the last five years
- Suboptimal cost structure is highlighted by its history of operating losses
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $66.78 per share, Zillow trades at 35.4x forward P/E. Dive into our free research report to see why there are better opportunities than ZG.
Darden (DRI)
Market Cap: $23.22 billion
Founded in 1968 as Red Lobster, Darden (NYSE: DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Does DRI Fall Short?
- Sizable revenue base leads to growth challenges as its 5.7% annual revenue increases over the last six years fell short of other restaurant companies
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Lacking pricing power results in an inferior gross margin of 21.3% that must be offset by turning more tables
Darden’s stock price of $198.41 implies a valuation ratio of 19.5x forward P/E. Read our free research report to see why you should think twice about including DRI in your portfolio.
C.H. Robinson Worldwide (CHRW)
Market Cap: $10.56 billion
Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQ: CHRW) offers freight transportation and logistics services.
Why Do We Pass on CHRW?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 12.1% annually over the last two years
- Issuance of new shares over the last two years caused its earnings per share to fall by 13.9% annually, even worse than its revenue declines
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
C.H. Robinson Worldwide is trading at $89.27 per share, or 18.3x forward P/E. To fully understand why you should be careful with CHRW, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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.
