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 is one mid-cap stock with huge upside potential and two that may have trouble.
Two Mid-Cap Stocks to Sell:
Restaurant Brands (QSR)
Market Cap: $22.29 billion
Formed through a strategic merger, Restaurant Brands International (NYSE:QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Why Do We Think Twice About QSR?
- Estimated sales growth of 4.4% for the next 12 months implies demand will slow from its six-year trend
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 4.5 percentage points
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Restaurant Brands’s stock price of $68.27 implies a valuation ratio of 17.2x forward P/E. To fully understand why you should be careful with QSR, check out our full research report (it’s free for active Edge members).
Hewlett Packard Enterprise (HPE)
Market Cap: $26.42 billion
Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE:HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.
Why Does HPE Worry Us?
- Annual sales growth of 4.2% over the last five years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
- Earnings per share fell by 7.5% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- ROIC of 2.9% reflects management’s challenges in identifying attractive investment opportunities
Hewlett Packard Enterprise is trading at $20.19 per share, or 9.2x forward P/E. Check out our free in-depth research report to learn more about why HPE doesn’t pass our bar.
One Mid-Cap Stock to Watch:
Advanced Drainage (WMS)
Market Cap: $11.05 billion
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE:WMS) provides clean water management solutions to communities across America.
Why Are We Fans of WMS?
- Excellent operating margin of 21.5% highlights the efficiency of its business model, and its rise over the last five years was fueled by some leverage on its fixed costs
- Free cash flow margin increased by 11.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are climbing as it finds even more attractive growth opportunities
At $141.08 per share, Advanced Drainage trades at 23.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. 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
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