Key insights
- Wolfe Research sees value in mid-cap stocks, citing their underperformance relative to large caps and attractive valuations. They screened for S&P 400 companies with strong earnings growth, free cash flow, and positive EPS revisions, identifying names like Nexstar Media, Lear, and Brunswick. This suggests a potential broadening of market leadership beyond large caps, offering opportunities in mid-cap space.
Wolfe Research sees value in mid-cap stocks after years of underperformance
Investing.com -- Wolfe Research highlighted potential value in mid-cap stocks on Wednesday, noting the S&P 400 Mid-Cap index has returned approximately 9% this year after lagging large-cap stocks for five years.
The S&P 400 Mid-Cap index currently trades at 15.9x next twelve months earnings per share compared to its long-term average of 16.1x, according to Wolfe Research.
The firm screened for S&P 400 companies meeting specific criteria including 10% next twelve months earnings per share growth, higher free cash flow yield, lower leverage, positive earnings per share revisions year-to-date, and declining share count.
Companies identified in the screen include Nexstar Media Group (NASDAQ: NXST), Lear Corp (NYSE: LEA), Brunswick Corp (NYSE: BC), YETI Holdings (NYSE: YETI), Instacart (NASDAQ: CART), and PBF Energy (NYSE: PBF).
While Wolfe Research stated a preference for large caps over small and mid-caps from a style perspective, the firm noted the market has shown signs of broadening out this year.