2 Mid-Cap Stocks on Our Watchlist and 1 to Avoid

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.

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 two mid-cap stocks with huge upside potential and one that could be down big.

One Mid-Cap Stock to Sell:

Teradyne (TER)

Market Cap: $17.34 billion

Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ:TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.

Why Are We Hesitant About TER?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.5% annually over the last two years
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.7 percentage points
3. 5.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Teradyne is trading at $107.82 per share, or 25.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TER.

Two Mid-Cap Stocks to Watch:

Comfort Systems (FIX)

Market Cap: $12.03 billion

Formed through the merger of 12 companies, Comfort Systems (NYSE:FIX) provides mechanical and electrical contracting services.

Why Will FIX Outperform?

1. Average backlog growth of 36.3% over the past two years shows it has a steady sales pipeline that will drive future orders
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 66.1% over the last two years outstripped its revenue performance
3. Improving returns on capital reflect management’s ability to monetize investments

At $339.17 per share, Comfort Systems trades at 20.1x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

RBC Bearings (RBC)

Market Cap: $10.96 billion

With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE:RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries.

Why Is RBC on Our Radar?

1. Annual revenue growth of 17.4% over the past five years was outstanding, reflecting market share gains this cycle
2. Disciplined cost controls and effective management resulted in a strong long-term operating margin of 19.8%, and its profits increased over the last five years as it scaled
3. Earnings per share have massively outperformed its peers over the last two years, increasing by 22.5% annually

RBC Bearings’s stock price of $351.95 implies a valuation ratio of 33.5x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

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Get started 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 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.