3 Mid-Cap Stocks with Large-Cap Potential
Large-cap stocks get all the attention, but investors would be wise to also consider adding mid-cap stocks to their portfolios. Not only do they offer higher growth potential, but they...
Large-cap stocks get all the attention, but investors would be wise to also consider adding mid-cap stocks to their portfolios. Not only do they offer higher growth potential, but they also can help diversify a portfolio. That’s why investors should take a look at highly rated mid-cap growth stocks such as Omnicell, Inc. (OMCL), Alkermes PLC (ALKS), and PVH Corp. (PVH).
Most investors are more familiar with large-cap companies, which have a market cap of $10 billion or more, than mid or small-cap companies. A mid-cap company has a market cap between $2 billion and $10 billion, and a small-cap company has a market cap under $2 billion. So, it would make sense that the larger companies get more media coverage and investor attention than their smaller peers.
But investors should consider adding smaller companies to their portfolios, especially for diversification reasons. While small-cap companies typically offer the most growth potential, they also come with more risk. Mid-cap stocks, on the other hand, still offer great growth potential but with less risk. Mid-cap stocks are in the middle of their growth curve, and many even see their market capitalization rise due to profit growth and higher share prices.
The trick is to find mid-cap stocks with solid business and robust growth potential. That's why I ran a search for mid-cap stocks in our proprietary POWR Ratings system that have an overall Buy rating and a Growth Grade of A. Three of the top stocks on this screen, Omnicell, Inc. (OMCL), Alkermes PLC (ALKS), and PVH Corp. (PVH), are seeing strong business growth, which is why investors should take a look.
Omnicell, Inc. (OMCL)
OMCL provides automation and business analytics software for healthcare providers. Its automation and analytics segment manufactures medication dispensing systems, pharmacy inventory management systems, and related software. Its medication adherence segment sells consumable medication blister cards and packaging equipment to help administer medication outside of a hospital setting.
The company is progressing with its 3-legged strategy, which includes market expansion through the delivery of innovative solutions, expansion into new markets, and development via strategic partnerships and acquisitions of new technologies. For example, last year company expanded its autonomous pharmacy portfolio with the acquisition of PSG's 340B Link business, which is now called Omnicell 340B
Autonomous pharmacy is a fully automated digital medication and supply management delivery platform that enables pharmacists, nurses, and other medical professionals to focus more on patients and less on administrative tasks. OMCL also accelerated a shift to cloud-based solutions and other tech-enabled services via the launches of Omnicell One and Central Pharmacy Dispensing Services.
The company continues to see momentum in its commercial business by its increasing contracts. OMCL has an overall grade of B, which is a Buy rating in our POWR Ratings system. The company has a Growth Grade of A, which is no surprise as earnings are up 51.7% over the past year, and EBITDA is up 48.7% over the same time frame. Analysts expect earnings to rise 46.9% for the year.
We also provide Value, Momentum, Stability, Sentiment, and Quality grades for OMCL, which you can find here. OMCL is ranked #20 in the Medical – Services industry. For more top stocks in this industry, click here.
Alkermes PLC (ALKS)
ALKS is a fully integrated global biotechnology company that applies its proprietary technologies to research, develop, and commercialize pharmaceutical products designed for unmet medical needs in major therapeutic areas. The company utilizes several collaborative arrangements to develop and commercialize products.
The firm purchases active drug products from third parties or receives them from its third-party licensees to formulate products using its technologies. The company is benefiting from strong sales for its proprietary products, Vivitrol and Aristada. Vivitrol can help prevent relapses into alcohol or drug abuse, and Aristada is a treatment for schizophrenia.
The momentum for these drugs is expected to continue in upcoming quarters. ALKS also has an impressive pipeline, which significantly expanded after acquiring Elan's drug technology EDT unit. It sees progress with pipeline candidates targeting major central nervous system disorders, including schizophrenia, addiction, depression, and multiple sclerosis. For instance, in June, the FDA approved Lybalvi to treat adults with schizophrenia and adults who have bipolar I disorder.
ALKS plans to launch Lybalvi later this month. Once launched, the drug should substantially boost the company's growth potential. The company has an overall grade of B and a Buy rating in our POWR Ratings system. ALKS also has a Value Grade of B, which makes sense as its EBITDA has grown an average of 115.7% per year over the past three years.
The company also has a Quality Grade of B due to a solid balance sheet. Its current ratio of 2.7 and debt-to-equity ratio of 0.4 indicate the company is on solid footing. For the rest of ALKS's grades (Value, Momentum, Stability, and Sentiment), click here. ALKS is ranked #15 in the Medical – Pharmaceuticals industry. For more top-ranked stock in this industry, click here.
PVH Corp. (PVH)
PVH designs and markets branded apparel in more than 40 countries. Its key fashion categories include men's dress shirts, ties, sportswear, underwear, and jeans. The company's leading designer brands, Calvin Klein and Tommy Hilfiger, generated nearly all its revenue after PVH stopped selling most of its smaller brands this year. It distributes its clothing wholesale to retailers and through company-owned stores.
The company is seeing a solid uptick in traffic in its store this year. This is due to the reopening of the economy and fewer occupancy restrictions. Its wholesale revenues were also up 77% in the second quarter due to strong sales in Europe and higher digital demand. Due to these results, management has raised its fiscal 2021 revenue growth guidance from 21% to 23% to 24% to 26%.
As e-commerce demand increases, the company has made investments in its omnichannel capabilities and improved its inventory. PVH is also on track with its expansion of direct-to-consumer digital business. It has also strengthened its network with third-party digital partners. PVH also benefits from a strong brand portfolio, as evident by its double-digit growth in the Tommy Hilfiger and Calvin Klein brands.
Plus, its lower promotions and higher sales mix have boosted its margins. This is expected to continue going in upcoming quarters. PVH has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of A as earnings are forecasted to rise 56.8% year over year in the current quarter and surge 535% for the year.
PVH also has a Value Grade of B as its forward P/E is only 10.52. To access all of PVH's grades (Momentum, Stability, Sentiment, and Quality), click here. PVH is ranked #15 in the A-rated Fashion & Luxury industry. For more top stocks in this highly rated industry, click here.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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OMCL shares were trading at $158.44 per share on Monday morning, up $0.50 (+0.32%). Year-to-date, OMCL has gained 32.01%, versus a 19.75% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.