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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.

This is precisely where StockStory comes in - we do the heavy lifting to identify companies with solid fundamentals so you can invest with confidence. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.

Coherent (COHR)

Market Cap: $12.54 billion

Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE:COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.

Why Does COHR Give Us Pause?

1. Incremental sales over the last two years were much less profitable as its earnings per share fell by 6% annually while its revenue grew

2. 11.5 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

3. Underwhelming 3.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging

Coherent is trading at $80.03 per share, or 19.6x forward P/E. If you’re considering COHR for your portfolio, see our FREE research report to learn more.

NVR (NVR)

Market Cap: $21.28 billion

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

Why Is NVR Not Exciting?

1. Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 1.5% for the past two years was weak

2. Estimated sales decline of 8.2% for the next 12 months implies a challenging demand environment

3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.1% annually

NVR’s stock price of $7,168 implies a valuation ratio of 14.8x forward P/E. Read our free research report to see why you should think twice about including NVR in your portfolio, it’s free.

Revvity (RVTY)

Market Cap: $10.73 billion

Formerly known as PerkinElmer until its rebranding in 2023, Revvity (NYSE:RVTY) provides health science technologies and services that support the complete workflow from discovery to development and diagnosis to cure.

Why Should You Dump RVTY?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth

2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 8.8 percentage points

3. Eroding returns on capital suggest its historical profit centers are aging