Most investors are more familiar with large-cap companies, which have a market cap of $10 billion or more, than with mid- or small-cap companies. Mid-cap stocks have a market cap between $2 billion and $10 billion, while small-cap companies have 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.
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 in this screen are seeing strong business growth, which is why investors should take a look at them.
Mid-Cap Stocks: 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 three-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 No. 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. It focuses on unmet medical needs in major therapeutic areas. And the company utilizes several collaborative arrangements to develop and commercialize its 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 No. 15 in the Medical — Pharmaceuticals industry. For more top-ranked stock in this industry, click here.
Mid-Cap Stocks: 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.
On the date of publication, David Cohne did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Cohne has 20 years of experience as an investment analyst and writer. 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.
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