Wall Street has seen an impressive turnaround in 2023 after a highly disappointing 2022. Year to date, the three major stock indexes — the Dow, the S&P 500 500 and the Nasdaq Composite — have rallied 3.6%, 14.9% and 31.5%, respectively. Unlike large-cap stocks, the mid-cap benchmark — the S&P 400 Index — is up a mere 0.2% year to date.
However, several mid-cap stocks (market capital > $5 billion < $10 billion) have skyrocketed this year with more upside left in the near-term. These stocks have the potential to become large-caps in the near future. Investment in these stocks with a favorable Zacks Rank should be fruitful going forward.
Why Mid-Cap Stocks
Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked, mid-cap stocks have a high potential to enhance their profitability, productivity, and market share. These may also become large caps in the course of time.
If the economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.
On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.
Our Top Picks
We have narrowed our search to five mid-caps that have provided nearly 50% or above returns year to date. These stocks have more upside left in the near-term and have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Zacks Investment Research
Image Source: Zacks Investment Research
e.l.f. Beauty Inc. ELF provides cosmetic and skin care products under the e.l.f. Cosmetics, e.l.f. Skin, Well People, and Keys Soulcare brand names worldwide. ELF offers eye, lip, face, face, paw, and skin care products. ELF sells its products through national and international retailers and direct-to-consumer channels, which include e-commerce platforms in the United States, and internationally primarily through distributors.
e.l.f. Beauty has an expected revenue and earnings growth rate of 57.8% and 61.5%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 9.8% over the last 30 days. The stock price of ELF has jumped 92.1% year to date.
Duolingo Inc. DUOL operates as a mobile learning platform in the United States, China, the United Kingdom, and internationally. DUOL offers courses in 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese through its Duolingo app. DUOL also provides a digital language proficiency assessment exam.
Duolingo has an expected revenue and earnings growth rate of 42.6% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last seven days. The stock price of DUOL has soared 206.4% year to date.
Qualys Inc. QLYS is a provider of cloud security and compliance solutions that enable organizations to identify security risks to their information technology infrastructures and protect their IT systems and applications from cyber-attacks.
QLYS’ solutions aare provided through its QualysGuard Cloud Platform. QLYS offers products for vulnerability management, policy compliance, web application scanning, malware detection, and associated security products.
Qualys has an expected revenue and earnings growth rate of 13.3% and 36.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last seven days. The stock price of QLYS has surged 57.3% year to date.
Wingstop Inc. WING franchises and operates restaurants. WING’s operating segment consists of the Franchise segment and the Company segment. WING offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop has an expected revenue and earnings growth rate of 26.3% and 29.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last seven days. The stock price of WING has climbed 59.9% year to date.
Futu Holdings Ltd. FUTU is a technology company that offers a digitized brokerage platform. FUTU is primarily engaged in the online brokerage services and margin financing services. It provides investing services through its digital platform, Futu NiuNiu, an integrated application accessible through any mobile device, tablet or desktop.
Futu Holdings has an expected revenue and earnings growth rate of 31% and 65.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the last seven days. The stock price of FUTU has advanced 49.4% year to date.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
