3 Top Mid-Cap Stocks to Buy Right Now

This trio of mid-cap stocks, including Bombardier, Inc. (TSX:BBD.B), looks especially intriguing.

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Hey there, Fools. I’m back again to highlight a few mid-cap stocks that are worth looking into. As a reminder, I do this because quality mid-cap stocks tend to have

  • much more room to grow than larger mega-cap blue chips; and
  • much less risk than more speculative, less established small-cap stocks.

In other words, mid-cap stocks often strike the perfect balance between risk and reward.

So, without further ado, here are three companies — with market caps between $2 billion and $10 billion — that I find particularly interesting.

Bombarded shares

Kicking off our list is Bombardier (TSX:BBD.B), which, after a recent slump, now sports a market cap of $9 billion. Over the past three months, shares of the aircraft manufacturer are down a significant 30% versus a loss of just 4% for the S&P/TSX Capped Industrials Index.

Investors are worried about Bombardier’s rail division and overall financial position, but there’s reason to remain bullish. In Q2, earnings climbed 18% as revenue increased 3% to $4.3 billion. Moreover, the company’s EBIT margin expanded 80 basis points to 6.4%.

Looking forward, management reaffirmed its sales, earnings, and cash flow targets for both 2018 and 2020. So, as long as you can handle the swings — the stock is about two times as volatile as the overall market — Bombardier seems like a mid-cap stock with decent earnings visibility.

Ritchie riches

Next we have Ritchie Bros. Auctioneers (TSX:RBA)(NYSE:RBA), which currently has a market cap of $4.7 billion. Over the past year, shares of the industrial equipment auctioneer are up 24% versus a loss of 2% for the S&P/TSX Composite Index.

Despite the solid one-year return, Ritchie Bros. shares have slumped in recent weeks, making it a solid way to buy some growth on the cheap. In Q2, the company’s gross transaction value — a key metric for auctioneers — climbed 14% to $1.4 billion, fueling a 22% increase in revenue. The strong results even prompted management to bump its quarterly dividend by 6% to $0.18 per share.

Over the past five years, Ritchie Bros.’s top line has increased 135%. When you couple that track record of growth with a decent 2% yield, the stock certainly looks GARP-y.

Fair exchange

Our final mid-cap this week is TMX Group (TSX:X), which sports a market cap of $4.7 billion. Shares of the Toronto Stock Exchange operator are up 18% year to date, while the S&P/TSX Composite Index is down 5% over the same time period.

TMX continues to see strong growth across all of its segments. In Q2, earnings per share jumped 44% as revenue increased 20% to a record $209.5 million. Moreover, operating cash flow grew 38% to $119.7 million.

Currently, TMX shares sport a reasonable forward P/E of 14 along with a solid dividend yield of 2.7%. The stock might not be ideal for the highly risk averse — it has more than double the volatility over the overall market. But for enterprising investors looking to add some solid upside to their long-term returns, TMX seems like a good choice.

Fool on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Brian Pacampara owns no position in any of the companies mentioned.   

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