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.
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 are three mid-cap stocks to avoid and some other investments you should consider instead.
Dollar Tree (DLTR)
Market Cap: $24.36 billion
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ: DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Does DLTR Give Us Pause?
- Products aren't resonating with the market as its revenue declined by 11.9% annually over the last three years
- Lack of new stores puts a ceiling on its growth and reflects a focus on optimizing sales at existing locations
- Low returns on capital reflect management’s struggle to allocate funds effectively
Dollar Tree is trading at $122.45 per share, or 20.1x forward P/E. Dive into our free research report to see why there are better opportunities than DLTR.
CoStar (CSGP)
Market Cap: $28.23 billion
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Are We Hesitant About CSGP?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 2.8% annually while its revenue grew
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 17.1 percentage points
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $66.81 per share, CoStar trades at 54.3x forward P/E. To fully understand why you should be careful with CSGP, check out our full research report (it’s free for active Edge members).
American Financial Group (AFG)
Market Cap: $11.51 billion
With roots dating back to 1872 and a business model that empowers local decision-making, American Financial Group (NYSE: AFG) is an insurance holding company that specializes in commercial property and casualty insurance products for businesses through its Great American Insurance Group.
Why Does AFG Fall Short?
- Net premiums earned expanded by 4.8% annually over the last five years, falling below our expectations for the insurance sector
- Earnings per share fell by 4.5% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 4.8% annually over the last five years
American Financial Group’s stock price of $137.92 implies a valuation ratio of 2.4x forward P/B. Read our free research report to see why you should think twice about including AFG in your portfolio.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
