3 Mid-Cap Stocks with Questionable Fundamentals

Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations. However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.

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. Keeping that in mind, here are three mid-cap stocks to avoid and some other investments you should consider instead.

J. M. Smucker (SJM)

Market Cap: $10.22 billion

Best known for its fruit jams and spreads, J.M Smucker is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Is SJM Risky?

• Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
• Efficiency has decreased over the last year as its operating margin fell by 23.7 percentage points
• Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging

J. M. Smucker’s stock price of $95.90 implies a valuation ratio of 9.4x forward P/E. Read our free research report to see why you should think twice about including SJM in your portfolio.

United Airlines (UAL)

Market Cap: $24.27 billion

Founded in 1926, United Airlines Holdings operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.

Why Do We Steer Clear of UAL?

• Demand for its offerings was relatively low as its number of revenue passenger miles has underwhelmed
• Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 6.8 percentage points
• Underwhelming 5.6% return on capital reflects management’s difficulties in finding profitable growth opportunities

United Airlines is trading at $74.40 per share, or 7x forward P/E. Dive into our free research report to see why there are better opportunities than UAL.

Solventum (SOLV)

Market Cap: $12.57 billion

Founded in 1985, Solventum develops, manufactures, and commercializes a portfolio of healthcare products and services addressing critical customer and therapeutic patient needs.

Why Are We Cautious About SOLV?

• Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
• Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 4.2 percentage points
• Earnings per share fell by 21.9% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable

At $72.34 per share, Solventum trades at 12.8x forward P/E. If you’re considering SOLV for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return).