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.

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.

Nordson (NDSN)

Market Cap: $13.05 billion

Founded in 1954, Nordson Corporation (NASDAQ: NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

Why Does NDSN Fall Short?

1. 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
2. Earnings per share lagged its peers over the last two years as they only grew by 1.2% annually
3. Eroding returns on capital suggest its historical profit centers are aging

Nordson is trading at $232.32 per share, or 21.5x forward P/E. To fully understand why you should be careful with NDSN, check out our full research report (it’s free).

Fortive (FTV)

Market Cap: $16.84 billion

Taking its name from the Latin root of "strong", Fortive (NYSE: FTV) manufactures products and develops industrial software for numerous industries.

Why Do We Think FTV Will Underperform?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Earnings per share lagged its peers over the last five years as they only grew by 1.5% annually
3. ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging

Fortive’s stock price of $49.97 implies a valuation ratio of 18.4x forward P/E. Check out our free in-depth research report to learn more about why FTV doesn’t pass our bar.

NVR (NVR)

Market Cap: $23.19 billion

Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.

Why Are We Cautious About NVR?

1. Average backlog growth of 1.3% over the past two years was mediocre and suggests fewer customers signed long-term contracts
2. Forecasted revenue decline of 6.9% for the upcoming 12 months implies demand will fall off a cliff
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $8,095 per share, NVR trades at 18.8x forward P/E. Read our free research report to see why you should think twice about including NVR in your portfolio.

Stocks We Like More

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