Market analysts are increasingly highlighting mid-cap stocks as a potentially attractive investment opportunity, particularly in the current economic climate. These stocks offer a balance between the stability of large-cap companies and the growth potential of small-cap firms. In February, Global Investment Strategist at ProShares Advisors Simeon Hyman also shared that he sees mid-cap stocks as a current market “sweet spot.” We covered his sentiment earlier in our 10 Best Performing Mid Cap Stocks to Buy According to Analysts article. Here’s an excerpt from it:
“Currently, mid-caps are undervalued, offering investors about $0.50 on the dollar, a situation that hasn’t occurred with small caps despite their underperformance… mid-caps also have a strong domestic focus, with about 75% of their revenues coming from domestic sources… mid-caps generally offer higher quality than small caps, lacking the losses and negative earnings often seen in small-cap companies.”
Earlier on January 25, Jill Carey Hall, BofA global research head of US small and mid-cap strategy, joined CNBC’s ‘Closing Bell’ to discuss small-cap headwinds and the opportunity in domestic mid-caps. She noted that the backdrop for the Russell 2000 remains challenging, with the profit growth recovery story that many investors were optimistic about last year continuing to be revised downward and pushed further into 2025. As a result, small-cap profits have continued to disappoint, with negative year-over-year earnings growth still prevalent in this segment. In contrast, mid-caps have shown better fundamentals, making them a more attractive option for investors seeking a favorable risk-reward balance, especially in an environment where multiple rate cuts have been priced out of the market.
Hall highlighted that interest rates still play a crucial role in market dynamics. Bank of America’s economists expect the Fed to maintain its current stance without further cuts, which could pose refinancing risks for small caps. Mid-caps, on the other hand, have better balance sheets and fundamental trends, which positions them more favorably. Despite the optimism around economic policies and potential deregulation, Hall noted that small caps face a high bar for investor confidence after a decade of underperformance. Historically, small caps are due for an outperformance cycle, and relative valuations suggest they could offer the best price returns over the next decade. However, for this year, investors are cautious about reentering the small-cap space without a more convincing profit turnaround. Stabilizing or potentially lower interest rates could be beneficial for small caps, as these factors have significantly influenced rallies and sell-offs in the Russell 2000.
She suggested focusing on smaller mid-caps with profits, less leverage, and less refinancing risk, or those that are economically sensitive. Given Hall’s sentiment, we’re here with a list of the 10 worst-performing mid-cap stocks to buy according to analysts.
Methodology
We used the Finviz stock screener to compile a list of the worst-performing mid-cap stocks that were trading between $2 billion and $10 billion. We then picked the top 10 stocks with 6-month declines higher than 50% and an average upside potential of over 30%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
Note: All data is as of February 26.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Worst Performing Mid Cap Stocks to Buy According to Analysts
10. e.l.f. Beauty Inc. (NYSE:ELF)
6-Month Performance as of February 26: -53.36%
Upside Potential as of February 26: 35.99%
Number of Hedge Fund Holders: 35
e.l.f. Beauty Inc. (NYSE:ELF) is a global cosmetics and skincare company. Operating under a portfolio of brands, it delivers products across multiple channels. These range from major retailers to its own expanding e-commerce platform. It continues to expand its reach and product offerings.
In FQ3 2025, its color cosmetics segment grew 16% year-over-year, while the overall market shrank 5%. This difference allowed the company to gain a 2.2% market share. It’s now the top-selling brand in terms of the number of units sold, with 14% of the market. It’s also the second highest-selling brand in terms of dollar sales, holding 12% of the market. It doubled its market share in just three years.
Partnerships with retail stores help the company expand. It’s the number one brand at Target, with over 20% of the market. It also moved up to the number two spot at Walmart. It’s also expanding through new products. It had 6 of the top 10 new makeup product launches in 2024. In Q3, sales of face, lip, and eye makeup increased. Although the overall sales forecast for FY25 was slightly lowered to 27-28% growth, e.l.f. Beauty Inc. (NYSE:ELF) plans to continue growing by introducing new versions of popular products and using strong marketing strategies.
Polen US Small Company Growth Strategy sees e.l.f. Beauty Inc.’s (NYSE:ELF) stock decline as a temporary buying opportunity, driven by short-term concerns. The firm maintained strong confidence in its long-term growth potential and market share expansion. It stated the following in its Q3 2024 investor letter:
“The Portfolio’s top detractors were Progyny, elf Beauty, and Alarm.com. E.l.f. Beauty, Inc. (NYSE:ELF), a discount beauty company focused on cosmetics and skincare, is a new addition to the Portfolio this quarter. Please see Portfolio Activity below for further detail. We are intrigued by the company’s impressive track record for growth, margins, and returns on capital. While elf has reported significant results all year, shares came under pressure, in our view, as short-term investors primarily appeared to anticipate a slowdown in revenue growth, possibly due to investor concerns of market saturation, economic conditions, and valuation concerns, among other factors. While we are confident in how we underwrote our initial investment for returns above the portfolio average, the stock has come under even more pressure than we anticipated. We used this weakness to add to our position. We’re intrigued by the strength elf has experienced across its retailer and ecommerce channels, particularly in taking market share in a challenging consumer environment, given their relatively inexpensive prices vs. competitors.
elf Beauty, described above, is a discount beauty company focused on cosmetics and skincare. We find the company’s reputation for quality, innovation, and prices below mass cosmetics brands to be uniquely positioned. While this combination of innovation, quality, and value has led to compelling growth, we still believe it’s early days for the company. elf’s brand awareness is significantly less than that of more prominent players; it is still adding shelf space, expanding its product portfolio, and entering the skincare market. elf is also still a US-focused business, with some early signs of international success. The company’s financial profile is strong, and we expect EPS to grow by 25% over the long term.”
9. TransMedics Group Inc. (NASDAQ:TMDX)
6-Month Performance as of February 26: -57.10%
Upside Potential as of February 26: 43.15%
Number of Hedge Fund Holders: 29
TransMedics Group Inc. (NASDAQ:TMDX) provides organ transplant therapy through its innovative Organ Care System (OCS). It provides a unique platform that preserves and optimizes donor organs outside the body, significantly improving transplant outcomes. With specialized OCS systems for lungs, hearts, and livers, alongside a national OCS program for organ retrieval and logistics, it is expanding the availability of life-saving transplants.
The company’s transplant logistics network is a major growth driver and made a revenue of $20.1 million in Q3 2024. This was an increase from $2.1 million a year ago and also represented a 5% sequential increase. This reflects its expanding infrastructure and service demand. The company is building its own fleet, reaching 18 aircraft by Q3. It also invested in a maintenance hub in Dallas. Its planes covered 61% of organ transport missions in Q3, up from 59% in Q2, even with scheduled maintenance.
However, these investments impacted margins. Q3 gross margin was 56%, down from 61% in Q2, due to infrastructure spending and using more third-party transport. Margins are expected to improve as TransMedics Group Inc. (NASDAQ:TMDX) scales. The company is now maintaining its yearly revenue guidance of $425-$445 million, which represents a 76-84% growth. It’s also developing advanced organ preservation technology which aims for more efficient transplants.
Invesco Discovery Fund stated the following regarding TransMedics Group Inc. (NASDAQ:TMDX) in its Q2 2024 investor letter:
“TransMedics Group, Inc. (NASDAQ:TMDX)offers transplant therapy for end-stage organ failure patients across multiple diseases. Management reported strong quarterly results and raised 2024 guidance above consensus expectations. The company has been helping to increase the size of the US transplant market as it has delivered more donor organs to recipients faster with its unique service offering.”
8. BRP Inc. (NASDAQ:DOOO)
6-Month Performance as of February 26: -42.90%
Upside Potential as of February 26: 43.36%
Number of Hedge Fund Holders: 8
BRP Inc. (NASDAQ:DOOO) is a global leader in the power-sports and marine industries, with a portfolio of recreational vehicles and products. From the iconic Ski-Doo and Sea-Doo to Can-Am ATVs and a growing marine lineup, it delivers innovative designs and cutting-edge technology across various markets. It encompasses everything from snowmobiles and personal watercraft to boats and engines.
The company’s Off-Road Vehicle (ORV) segment drives most of its growth following the divestiture of its Marine businesses. It reduced ORV inventory by 22%, surpassing its initial targets. Despite competitors pushing older and heavily discounted models, this company secured market share gains in the sales of its newer and more profitable ORV units. This is attributed to the strength of its updated product lineup, particularly the high-end Defender cab models in the utility segment and the new Outlander platform in the ATV segment. These have gained about 4% of the market share. It’s also expanding its ORV-centric offerings with the launch of its Can-Am electric motorcycle line.
Although revenue from year-round products, including ORV, saw a 12% decline, BRP Inc. (NASDAQ:DOOO) has reaffirmed its full-year financial guidance, which now reflects the sale of its Marine division. This refocus is expected to significantly enhance profitability.
7. IMPINJ Inc. (NASDAQ:PI)
6-Month Performance as of February 26: -42.68%
Upside Potential as of February 26: 49.77%
Number of Hedge Fund Holders: 37
IMPINJ Inc. (NASDAQ:PI) provides a cloud-based platform that wirelessly links everyday objects to the digital world. Through its innovative endpoint ICs, reader systems, and software, it enables businesses to track, manage, and authenticate items across diverse industries, from retail and logistics to healthcare and manufacturing.
Its core revenue driver is its Endpoint IC segment, which saw $289.8 million in revenue for the full year 2024, a 30% jump year-over-year. This segment focuses on selling integrated circuits (ICs) used in RAIN RFID tags, which are attached to items for tracking and inventory management. This growth was propelled by a 34% increase in unit volumes, which were particularly strong in retail apparel, general merchandise, supply chain, and logistics. However, Q1 2025 anticipates a sequential decline in Endpoint IC revenue. This is due to partner inventory corrections, geopolitical uncertainties, and the absence of major new program rollouts. Despite this, January bookings exceeded the Q4 run rate.
The company is banking on its Gen2X technology and M800 series. Gen2X enhances RAIN system performance, and the M800 series enables smaller and cost-effective inlays. This is relevant for cosmetics, accessories, and food, expanding recurring revenue opportunities. IMPINJ Inc. (NASDAQ:PI) is also pursuing growth in the grocery sector, engaging with major chains for item-level food tagging and self-checkout. These could exceed the volume of any previous projects, with possible ramps in 2026.
Alger Weatherbie Specialized Growth Fund stated the following regarding IMPINJ Inc. (NASDAQ:PI) in its Q1 2024 investor letter:
“Impinj, Inc. (NASDAQ:PI) engages in the development and sale of RAIN, a radio frequency identification solution. Its platform allows inventory management, patient safety, asset tracking and item authentication for the retail, healthcare, supply chain and logistics. hospitality, food and beverage, ‘and industrial manufacturing industries. During the quarter, shares contributed to performance as the company reported better-than- expected fiscal fourth quarter results, driven by strong revenue growth and profitability. Further, management raised fiscal first quarter guidance above analyst estimates, noting that the company is beginning to see a recovery in the North American retail market, along with year-end channel inventory approaching more normalized levels – both of which had been headwinds for growth in the second half of 2023. The company also noted that key large-scale enterprise deployments appear to be on track, supporting key new use cases for the company’s RFID technology in supply chain, logistics and general merchandise applications Separately, in March, Impinj announced a favorable litigation settlement with a top competitor who will be paying Impinj an annual licensing tee going forward.”
6. Acadia Healthcare Company Inc. (NASDAQ:ACHC)
6-Month Performance as of February 26: -45.95%
Upside Potential as of February 26: 53.48%
Number of Hedge Fund Holders: 46
Acadia Healthcare Company Inc. (NASDAQ:ACHC) provides behavioral healthcare services and offers a range of treatment options across the US and Puerto Rico. From inpatient psychiatric facilities and specialty centers to outpatient services, it addresses the diverse mental health and recovery needs of communities.
In Q3 2024, the company generated a total of $816 million in revenue, which was an 8.7% increase year-over-year. This came from increased patient days (4.7%) and higher revenue per patient day (3.6%). It aims to add 1,200 beds in the full year 2024, with 700 coming online in Q4 alone, through new facilities and joint ventures. The US has a severe shortage of psychiatric beds, so the company is investing billions to add over 2,000 beds in the next two years, expecting this to boost volume growth starting in 2025.
Despite recent media scrutiny leading to a temporary volume dip in October, the company is confident in its long-term growth. Acadia Healthcare Company Inc. (NASDAQ:ACHC) is focused on quality and compliance. It has invested $100 million in technology, which includes wearable patient monitoring and electronic medical records. It has also strengthened its quality and compliance teams and implemented dashboards and monthly reviews. This focus has resulted in positive patient feedback, with 81% reporting feeling hopeful after treatment.
5. Tidewater Inc. (NYSE:TDW)
6-Month Performance as of February 26: -47.06%
Upside Potential as of February 26: 60.95%
Number of Hedge Fund Holders: 33
Tidewater Inc. (NYSE:TDW) provides offshore support vessels and marine services to the energy industry and facilitates critical operations from oil and gas exploration to wind farm development. With a fleet of specialized vessels, it supports a range of activities, which include transportation, construction, and maintenance. It serves major energy companies and related industries worldwide.
Its Offshore Support Vessel (OSV) operations, primarily Platform Supply Vessels (PSVs) and Anchor Handling Tug Supply (AHTS) vessels, drive its revenue. In Q3 2024, average day rates rose 5.4% to $22,275, exceeding expectations. This helped generate $67 million in free cash flow. Despite slight utilization dips, leading-edge day rates climbed. Larger Platform Supply Vessels saw a 6% increase to over $37,000, and medium-class Platform Supply Vessels jumped 26% to over $35,000. Smaller Anchor Handling Tug Supply vessels also saw double-digit rate increases.
The company is prioritizing short-term contracts to maximize day rate potential, even with potential near-term utilization fluctuations. It’s actively repurchasing shares, spending $111 million in the past four quarters to reduce share count, and plans to increase this rate. Tidewater Inc. (NYSE:TDW) is also open to mergers and acquisitions, but current market uncertainty has widened the bid and ask spread.
Praetorian Capital anticipates a significant resurgence in offshore drilling, which positions this company for substantial long-term profits as the decade-long bear market concludes. It stated the following regarding Tidewater Inc. (NYSE:TDW) in its Q4 2024 investor letter:
“In 2010, at the dawning of the age of shale, offshore oil production accounted for approximately 31% of global oil supply. As shale has encroached on offshore, that number has declined to only 27% of total oil production in 2024. As you can imagine, this has led to a bear market in offshore services equipment that has lasted for more than a decade and bankrupted almost all players in the sector. This offshore equipment (Drillships, Semi-Subs, Jackups, PSVs, AHTS, and other associated pieces of highly engineered steel) is what we own through positions in Valaris (VAL – USA), Tidewater Inc. (NYSE:TDW) and Noble (NE – USA), as I believe that the decade-long bear market has now ended, and that the call on this equipment will lead to excess profits for these companies for many years into the future.
Why did shale encroach so effectively against offshore and steal so much market share?? I’d like to point you to three factors. To start with, the Deepwater Horizon accident gave the industry a black eye, at a time when a burgeoning ESG movement was taking hold—this led oil executives to shun offshore oil production, even if the returns were superior to shale. Secondly, shale executives overpromised in terms of the economics of shale. We can debate if this overpromise was malicious or just oil industry optimism, but that discussion can be saved for a different time. However, the net effect of this overpromise led E&P executives to believe that shale would have better returns on capital than offshore, particularly as the production could be ramped up and down to take advantage of fluctuations in the oil price—this diverted capital from offshore assets, starving them of capital spending. Finally, there was an odd belief, even amongst many energy executives, that the energy transition would lead to peak oil consumption during the 2020s, implying that long-cycle energy projects, like offshore, were unnecessary…” (Click here to read the full text)
4. Scorpio Tankers Inc. (NYSE:STNG)
6-Month Performance as of February 26: -42.12%
Upside Potential as of February 26: 67.64%
Number of Hedge Fund Holders: 32
Scorpio Tankers Inc. (NYSE:STNG) is a global shipping company that specializes in the seaborne transportation of crude oil and refined petroleum products. With a substantial fleet of modern tankers, including LR2, MR, and Handymax vessels, it facilitates the movement of essential energy resources.
In 2024, the company generated $513 million in adjusted net income. This came from efficient fleet management and favorable market conditions. The company improved fleet efficiency by dry-docking 54 vessels, reducing future costs, and also sold 12 older vessels. This enhanced its fleet’s age profile. Scorpio Tankers Inc. (NYSE:STNG) is optimistic about the market due to strong product demand and low inventories. It’s also navigating geopolitical risks like tariffs and Red Sea disruptions.
It maintains $1.3 billion in liquidity for flexibility and is actively working to diversify its capital structure, as shown by its recent Nordic bond issuance. This refers to the $200 million of five-year senior unsecured bonds issued in the Nordic bond market at a 7.5% coupon to diversify the company’s capital structure and secure favorable financing.
3. PACS Group Inc. (NYSE:PACS)
6-Month Performance as of February 26: -67.55%
Upside Potential as of February 26: 78.04%
Number of Hedge Fund Holders: 31
PACS Group Inc. (NYSE:PACS) provides senior care services in the US and operates a network of skilled nursing and assisted living facilities. Focused on acquiring and managing healthcare properties, it delivers a range of services, which include independent living and specialized care. The aim is to address the diverse needs of the senior population.
It’s aggressively expanding its post-acute care facility operations through strategic acquisitions. In November 2024, it acquired 8 facilities in Pennsylvania, adding 1,199 beds and entering a new state. In December 2024, it acquired 11 facilities in Tennessee, adding 1,310 beds and expanding its presence to 17 states. In the first quarter of 2025, PACS Group Inc. (NYSE:PACS) expects to acquire its 12th nursing facility of this period. The company employs a flexible acquisition strategy, using both lease and purchase models. Currently, it operates over 314 facilities with more than 40,000 employees, serving nearly 30,000 patients daily.
These expansions are expected to drive revenue growth and increase market share. However, analyst opinions vary. Macquarie lowered its price target to $24 from $42, while maintaining an Outperform rating. Truist Financial lowered its target to $32 from $46 but also maintained a Buy rating.
2. Crinetics Pharmaceuticals Inc. (NASDAQ:CRNX)
6-Month Performance as of February 26: -39.19%
Upside Potential as of February 26: 127.55%
Number of Hedge Fund Holders: 41
Crinetics Pharmaceuticals Inc. (NASDAQ:CRNX) is a clinical-stage company that develops innovative oral therapies for rare endocrine disorders and tumors. With a pipeline focused on novel nonpeptide agonists and antagonists, it’s advancing treatments for conditions like acromegaly, Cushing’s disease, and hyperparathyroidism. It’s also exploring solutions for diabetes and obesity.
The company ended Q3 2024 with $863 million in cash. R&D expenses were $61.9 million for the quarter ended September 30, 2024. Net loss for the quarter was $76.8 million. In Q3 2024, the company submitted an NDA for paltusotine, which is an acromegaly treatment that aims for a fall 2025 launch. It’s preparing for this by working with payers and doctors. The company’s pipeline includes atumelnant, which is in Phase 2 for CAH and Cushing’s disease. It also plans to share full data from 28 patients in early 2025 and start Phase 3 trials for CAH in 2025, and potentially for Cushing’s. 4 new drug candidates are also undergoing pre-clinical studies, with IND applications planned for 2025. These include treatments for hyperparathyroidism, polycystic kidney disease, and Graves’ disease. It’s also developing non-peptide drug conjugates (NDCs) for cancer. Its first NDC, which is CRN09682, showed promising results in mice. An IND filing is expected in early 2025.
1. Viking Therapeutics Inc. (NASDAQ:VKTX)
6-Month Performance as of February 26: -56.78%
Upside Potential as of February 26: 260.17%
Number of Hedge Fund Holders: 42
Viking Therapeutics Inc. (NASDAQ:VKTX) is a clinical-stage biopharmaceutical company that develops novel therapies for metabolic and endocrine disorders. With a diverse pipeline featuring oral drug candidates like VK2809 for NASH and NAFLD, VK5211 for hip fracture recovery, and VK2735 for weight loss, it’s advancing treatments across a range of significant medical needs.
The company made progress in 2024 with positive data from several clinical trials. For obesity, its VK2735 program showed promising results. In a Phase 2 trial, subcutaneous injections led to a 14.7% average weight loss after 13 weeks. It also tested an oral version, which resulted in a 5.3% weight loss in 28 days. It’s planning a Phase 3 trial for the injectable and a Phase 2 for the oral version.
Its NASH drug, VK2809, also showed positive results in a Phase 2b trial. After 52 weeks, 63-75% of patients saw NASH resolution, compared to 29% in the placebo group. Fibrosis improvement was seen in 44-57% of patients, compared to 34% in the placebo group. The company is working with the FDA to plan a Phase 3 trial.
Viking Therapeutics Inc. (NASDAQ:VKTX) ended Q3 2024 with $930 million in cash. R&D expenses for the first nine months of 2024 were $70.7 million. Another one of its recent drugs is the VK0214, for X-ALD, which showed positive results in a Phase 1b trial and a new preclinical program for obesity.
The company’s successful weight-loss drug trials, particularly the promising oral version, have driven substantial stock appreciation and positioned Viking Therapeutics Inc. (NASDAQ:VKTX) as a strong acquisition candidate. Wasatch Micro Cap Growth US Strategy stated the following in its Q1 2024 investor letter:
“Viking Therapeutics, Inc. (NASDAQ:VKTX) also contributed during the quarter. A clinical-stage biopharmaceutical company, Viking develops therapies for metabolic and endocrine disorders. Shares of the company soared in February after its injectable weight-loss drug demonstrated best-in-class efficacy in a mid-stage clinical trial. A separate, early-stage trial testing the safety and tolerability of an orally administered version of the drug also yielded positive data. A successful oral treatment would be a game changer in a multibillion-dollar industry. We believe these results make Viking a potentially attractive target for acquisition by a larger organization.”
While we acknowledge the growth potential of Viking Therapeutics Inc. (NASDAQ:VKTX), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VKTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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