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.
Jabil (JBL)
Market Cap: $25.68 billion
With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil (NYSE: JBL) provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.
Why Does JBL Worry Us?
- Annual sales declines of 3.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share lagged its peers over the last two years as they only grew by 9.2% annually
- Low free cash flow margin of 3.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Jabil’s stock price of $239.68 implies a valuation ratio of 19.1x forward P/E. Read our free research report to see why you should think twice about including JBL in your portfolio.
Penumbra (PEN)
Market Cap: $12.12 billion
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE: PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Why Does PEN Fall Short?
- Smaller revenue base of $1.33 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.8% for the last five years
- ROIC of 2.1% reflects management’s challenges in identifying attractive investment opportunities
Penumbra is trading at $300.75 per share, or 66.3x forward P/E. To fully understand why you should be careful with PEN, check out our full research report (it’s free for active Edge members).
Penske Automotive Group (PAG)
Market Cap: $10.42 billion
With a diverse global network spanning the US, UK, Canada, Germany, Italy, Japan, and Australia, Penske Automotive Group (NYSE: PAG) operates automotive and commercial truck dealerships across the globe, selling new and used vehicles while providing service, parts, and financing options.
Why Does PAG Give Us Pause?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Gross margin of 16.5% is below its competitors, leaving less money for marketing and promotions
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 8.8% annually while its revenue grew
At $158.16 per share, Penske Automotive Group trades at 11.6x forward P/E. Check out our free in-depth research report to learn more about why PAG doesn’t pass our bar.
Stocks We Like More
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 Exlservice (+354% 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.
