Mid-cap stocks can deliver incredible gains for long-term investors. These stocks aren’t as popular as large-cap stocks, however some mid-cap stocks gain that type of popularity in the long run.
Some of these stocks can comfortably exceed large-cap stocks eventually. These stocks often benefit from lower valuations since they receive less coverage. Other mid-cap stocks have high valuations because of substantial revenue and earnings growth rates.
Investors who spot promising mid-cap stocks can capitalize on hidden opportunities before the rest of the market notices. However, some mid-cap stocks are better than others.
Investors should look for mid-cap corporations that have large runways, robust financials, and competitive advantages. These three mid-cap stocks can reward long-term investors seeking to outperform market indexes that focus on large-cap stocks.
Perion (PERI)
Perion (NASDAQ:PERI) is an ad-tech company based in Israel that offers advertising solutions across all major channels of digital advertising.
Perion’s versatility has made it more resilient in economic slowdowns than other advertising companies. When other companies reported declining year-over-year revenue and earnings in the second half of 2022, Perion continued to charge higher and report growing financials.
Perion, once again, reported strong financials in the second quarter. Revenue jumped by 22% year-over-year and GAAP net income went up by 10% year-over-year.
Investors should monitor annual growth rates for Perion’s CTV advertising and cookie-less targeting solution, SORT. Connect TV advertising went up by 104% year-over-year and now represents 7% of the company’s display advertising revenue. Display advertising revenue represents more than half of Perion’s total revenue.
SORT’s use of cookie-less targeting solutions can be a game changer. Google announced it will stop allowing 3rd-party cookie tracking on Chrome in 2024.
SORT achieved 84% year-over-year revenue growth and represents 21% of the company’s display advertising revenue. The movement to cookie-less advertising can increase demand for Perion’s advertising solutions. Shares have gained 10% year-to-date and are up by almost 900% over the past five years.
Celsius Holdings (CELH)
Celsius Holdings (NASDAQ:CELH) is a high-flying sports beverage company that has gained 4,000% over the past five years. The company has a long-term partnership with Pepsi (NASDAQ:PEP) that can help it penetrate more of the sports beverage market.
Celsius Holdings’ recent earnings report helps to explain why investors are enthusiastic about the stock. The company reported $325.8 million in Q2 revenue. That’s more than 100% year-over-year revenue growth.
The company performed even better on the profit line. Net income reached $51.5 million compared to $9.2 million from the same time last year. The gain represents a 462.5% year-over-year improvement.
The company holds a $12 billion market cap and has gone through a 15% correction in the week starting September 18th. Investors who cast a wider lens can see the stock has gained almost 70% year-to-date.
Investors agree that the company is growing rapidly and looks promising, but valuation remains a problem for some people. CELH trades at a forward P/E ratio of 70 which isn’t as generous as Perion’s 10 forward P/E ratio.
Axcelis Technologies (ACLS)
Semiconductor chips are a critical component of the global economy. These chips power various devices, appliances, and other resources that we use every day. Artificial intelligence is only increasing the demand for these chips.
Axcelis Technologies (NASDAQ:ACLS) uses advanced ion implantation to assist with producing transistors and boost chip efficiency. Axcelis Technologies features healthy profit margins and growing financials. Revenue and net income both achieved double-digit year-over-year growth rates.
A recent pullback in the stock has brought the P/E ratio to a more enticing 25. The forward P/E ratio currently sits at 18. Axcelis Technologies projects $280 million in Q3 revenue which would represent a 22.2% year-over-year growth rate.
The revenue projection offered good signs about the company’s future, and a recent $200 million stock buyback has added more optimism. The $200 million stock buyback represents roughly 4% of the company’s market cap.
Like many growth stocks, Axcelis Technologies has been going through a correction in recent days. However, shares have still roughly doubled year-over-year and have gained almost 700% over the past five years.
On this date of publication, Marc Guberti held long positions in PERI, CELH, and ACLS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.