10 Best Mid Cap 2b for February 2026
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Market Overview & Selection Criteria
Mid-cap stocks around the $9-10B market cap range offer a compelling balance of growth potential and stability, often overlooked amid large-cap dominance and small-cap volatility. In the current market environment, characterized by steady revenue growth across industrials, financials, and healthcare, ValueSense's proprietary analysis highlights companies trading below their intrinsic value, as determined by machine learning-driven models incorporating ROIC, FCF margins, and quality ratings. These 10 best mid-cap stock picks were selected using ValueSense's automated fundamental screener, prioritizing high ROIC (>10%), positive free cash flow where possible, quality ratings above 5.5, and intrinsic value upside. This methodology focuses on undervalued opportunities in water management, manufacturing, financials, and healthcare, ideal for diversified watchlists targeting long-term value.
Featured Stock Analysis
Stock #1: A. O. Smith Corporation (AOS)
| Metric | Value |
|---|---|
| Market Cap | $10.2B |
| Quality Rating | 6.5 |
| Intrinsic Value | $81.2 |
| 1Y Return | 9.7% |
| Revenue | $3,830.2M |
| Free Cash Flow | $546.0M |
| Revenue Growth | 0.3% |
| FCF margin | 14.3% |
| Gross margin | 38.8% |
| ROIC | 21.7% |
| Total Debt to Equity | 10.8% |
Investment Thesis
A. O. Smith Corporation (AOS), with a market cap of $10.2B, demonstrates solid financial health through a Quality rating of 6.5 and strong ROIC of 21.7%. The company's intrinsic value stands at $81.2, suggesting potential undervaluation relative to market dynamics. Revenue of $3,830.2M supports a healthy free cash flow of $546.0M, yielding a robust FCF margin of 14.3% and gross margin of 38.8%. Despite modest revenue growth of 0.3%, low total debt to equity at 10.8% underscores balance sheet strength, positioning AOS as a stable player in water heating and treatment solutions for value-focused portfolios.
This analysis reveals AOS's efficiency in capital allocation, with high ROIC indicating effective operations in a mature industry. The 1Y return of 9.7% reflects steady performance, making it a foundational pick for investors seeking reliable cash generation amid economic uncertainty.
Key Catalysts
- Exceptional ROIC of 21.7% signals superior capital efficiency.
- Strong FCF margin 14.3% and $546.0M free cash flow for reinvestment or dividends.
- Low debt levels (10.8% total debt to equity) enhance financial flexibility.
- Consistent gross margins 38.8% support profitability in essential infrastructure sectors.
Risk Factors
- Minimal revenue growth 0.3% may limit near-term expansion.
- Dependence on housing and construction cycles could pressure demand.
- Competitive pressures in water technology markets.
Stock #2: Watts Water Technologies, Inc. (WTS)
| Metric | Value |
|---|---|
| Market Cap | $9,918.0M |
| Quality Rating | 7.2 |
| Intrinsic Value | $233.5 |
| 1Y Return | 44.7% |
| Revenue | $2,353.8M |
| Free Cash Flow | $343.5M |
| Revenue Growth | 4.2% |
| FCF margin | 14.6% |
| Gross margin | 48.8% |
| ROIC | 15.1% |
| Total Debt to Equity | 10.1% |
Investment Thesis
Watts Water Technologies, Inc. (WTS), market cap $9,918.0M, earns a high Quality rating of 7.2, bolstered by impressive 1Y return of 44.7%. Intrinsic value of $233.5 points to significant upside potential. With revenue at $2,353.8M and free cash flow of $343.5M (FCF margin 14.6%), alongside gross margin of 48.8% and ROIC of 15.1%, WTS excels in water management solutions. Low total debt to equity of 10.1% and revenue growth of 4.2% highlight resilience and operational strength for long-term value investors.
The company's metrics indicate a premium business model, with high margins driving shareholder value. This positions WTS as a top performer in the watchlist, appealing to those targeting growth in sustainable infrastructure.
Key Catalysts
- Strong 1Y return 44.7% demonstrates market momentum.
- High gross margin 48.8% and FCF margin 14.6% for sustained profitability.
- Revenue growth of 4.2% amid sector tailwinds.
- Quality rating of 7.2 reflects superior fundamentals.
Risk Factors
- Elevated valuation relative to intrinsic value could cap short-term gains.
- Sensitivity to regulatory changes in water technologies.
- Supply chain vulnerabilities in manufacturing.
Stock #3: Generac Holdings Inc. (GNRC)
| Metric | Value |
|---|---|
| Market Cap | $9,909.1M |
| Quality Rating | 5.8 |
| Intrinsic Value | $221.2 |
| 1Y Return | 10.4% |
| Revenue | $4,352.4M |
| Free Cash Flow | $416.5M |
| Revenue Growth | 5.5% |
| FCF margin | 9.6% |
| Gross margin | 39.5% |
| ROIC | 10.5% |
| Total Debt to Equity | 60.2% |
Investment Thesis
Generac Holdings Inc. (GNRC), with $9,909.1M market cap, holds a Quality rating of 5.8 and intrinsic value of $221.2. Revenue reaches $4,352.4M, generating $416.5M free cash flow (FCF margin 9.6%), gross margin 39.5%, and ROIC 10.5%. Revenue growth of 5.5% and 1Y return of 10.4% support its role in power generation equipment, though higher total debt to equity at 60.2% warrants monitoring. This analysis frames GNRC as a growth-oriented pick with solid cash flows for diversified exposure.
GNRC's metrics show balanced operations in backup power, with potential for expansion in renewable energy transitions, making it educational for studying cyclical industrials.
Key Catalysts
- Revenue growth of 5.5% fuels expansion.
- Healthy free cash flow $416.5M despite moderate FCF margin.
- ROIC of 10.5% indicates efficient asset use.
- Demand from extreme weather events.
Risk Factors
- Elevated debt (60.2% total debt to equity) increases leverage risk.
- Cyclical demand tied to economic conditions.
- Lower quality rating 5.8 signals execution challenges.
Stock #4: Tetra Tech, Inc. (TTEK)
| Metric | Value |
|---|---|
| Market Cap | $9,888.0M |
| Quality Rating | 6.5 |
| Intrinsic Value | $40.6 |
| 1Y Return | 3.2% |
| Revenue | $5,232.7M |
| Free Cash Flow | $497.5M |
| Revenue Growth | (2.9%) |
| FCF margin | 9.5% |
| Gross margin | 18.4% |
| ROIC | 12.7% |
| Total Debt to Equity | 57.3% |
Investment Thesis
Tetra Tech, Inc. (TTEK), market cap $9,888.0M, features a Quality rating of 6.5 and intrinsic value of $40.6. Despite revenue decline of 2.9%, it generates $497.5M free cash flow (FCF margin 9.5%) on $5,232.7M revenue, with ROIC 12.7% and gross margin 18.4%. Total debt to equity at 57.3% and 1Y return of 3.2% position TTEK as a consulting services leader with cash flow resilience for value analysis.
The data underscores TTEK's ability to maintain FCF amid headwinds, offering insights into professional services stability.
Key Catalysts
- Strong free cash flow $497.5M supports operations.
- ROIC of 12.7% shows capital efficiency.
- Exposure to government contracts in engineering.
- Potential recovery in revenue post-contraction.
Risk Factors
- Negative revenue growth -2.9% indicates demand softness.
- High debt levels 57.3%.
- Low gross margins 18.4% pressure profitability.
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Stock #5: Modine Manufacturing Company (MOD)
| Metric | Value |
|---|---|
| Market Cap | $9,850.7M |
| Quality Rating | 6.4 |
| Intrinsic Value | $27.9 |
| 1Y Return | 80.2% |
| Revenue | $2,685.7M |
| Free Cash Flow | $69.2M |
| Revenue Growth | 8.1% |
| FCF margin | 2.6% |
| Gross margin | 24.1% |
| ROIC | 14.0% |
| Total Debt to Equity | 54.9% |
Investment Thesis
Modine Manufacturing Company (MOD), $9,850.7M market cap, has a Quality rating of 6.4 and standout 1Y return of 80.2%. Intrinsic value is $27.9, with revenue $2,685.7M, free cash flow $69.2M (FCF margin 2.6%), gross margin 24.1%, ROIC 14.0%, and revenue growth 8.1%. Total debt to equity at 54.9% reflects a high-momentum thermal management play.
MOD's explosive return highlights growth in EV and data center cooling, providing a case study in manufacturing upside.
Key Catalysts
- Exceptional 1Y return 80.2% drives momentum.
- Revenue growth of 8.1% signals demand surge.
- ROIC 14.0% for efficient scaling.
- Sector tailwinds in electrification.
Risk Factors
- Low FCF margin 2.6% limits cash flexibility.
- Debt burden 54.9%.
- Volatility from automotive cycles.
Stock #6: Gildan Activewear Inc. (GIL)
| Metric | Value |
|---|---|
| Market Cap | $9,825.2M |
| Quality Rating | 7.1 |
| Intrinsic Value | $38.3 |
| 1Y Return | 24.0% |
| Revenue | $3,852.8M |
| Free Cash Flow | $169.1M |
| Revenue Growth | 19.1% |
| FCF margin | 4.4% |
| Gross margin | 19.8% |
| ROIC | 27.6% |
| Total Debt to Equity | N/A |
Investment Thesis
Gildan Activewear Inc. (GIL), market cap $9,825.2M, boasts Quality rating 7.1 and intrinsic value $38.3. Revenue $3,852.8M yields $169.1M free cash flow (FCF margin 4.4%), with gross margin 19.8%, top ROIC 27.6%, and revenue growth 19.1%. 1Y return of 24.0% and N/A debt data suggest apparel manufacturing strength.
GIL exemplifies high-ROIC efficiency in basics apparel, ideal for value stock watchlists.
Key Catalysts
- Leading ROIC 27.6% for capital returns.
- Robust revenue growth 19.1%.
- Quality rating 7.1 indicates premium fundamentals.
- 1Y return 24.0% shows traction.
Risk Factors
- Modest FCF margin 4.4%.
- Apparel sector competition and pricing pressures.
- Supply chain risks in textiles.
Stock #7: Wintrust Financial Corporation (WTFC)
| Metric | Value |
|---|---|
| Market Cap | $9,789.0M |
| Quality Rating | 6.7 |
| Intrinsic Value | $212.4 |
| 1Y Return | 13.6% |
| Revenue | $4,230.0M |
| Free Cash Flow | $666.0M |
| Revenue Growth | 6.7% |
| FCF margin | 15.7% |
| Gross margin | 62.2% |
| ROIC | 35.5% |
| Total Debt to Equity | 61.7% |
Investment Thesis
Wintrust Financial Corporation (WTFC), $9,789.0M market cap, Quality rating 6.7, intrinsic value $212.4. Revenue $4,230.0M generates $666.0M free cash flow (15.7% margin), gross margin 62.2%, ROIC 35.5%, revenue growth 6.7%, 1Y return 13.6%. Debt to equity 61.7% fits regional banking profile.
WTFC's high ROIC and FCF make it a standout financial in this mid-cap stock picks collection.
Key Catalysts
- Outstanding ROIC 35.5% and FCF $666.0M.
- High gross margin 62.2%.
- Revenue growth 6.7%.
- Stable 1Y return 13.6%.
Risk Factors
- Interest rate sensitivity in banking.
- Debt levels 61.7%.
- Economic downturn impacts on loans.
Stock #8: Western Alliance Bancorporation (WAL)
| Metric | Value |
|---|---|
| Market Cap | $9,673.8M |
| Quality Rating | 5.7 |
| Intrinsic Value | $149.6 |
| 1Y Return | 1.6% |
| Revenue | $5,294.0M |
| Free Cash Flow | ($2,675.0M) |
| Revenue Growth | 5.6% |
| FCF margin | (50.5%) |
| Gross margin | 61.2% |
| ROIC | 70.3% |
| Total Debt to Equity | 0.0% |
Investment Thesis
Western Alliance Bancorporation (WAL), market cap $9,673.8M, Quality rating 5.7, intrinsic value $149.6. Revenue $5,294.0M shows negative free cash flow of $2,675.0M and FCF margin 50.5%, but high gross margin 61.2%, ROIC 70.3%, growth 5.6%, 1Y return 1.6%, zero debt to equity.
Despite FCF challenges, extreme ROIC highlights banking efficiency for analytical review.
Key Catalysts
- Exceptional ROIC 70.3%.
- Zero total debt to equity.
- Revenue growth 5.6%.
- High gross margins 61.2%.
Risk Factors
- Negative FCF -$2,675.0M raises liquidity concerns.
- Lower quality rating 5.7.
- Banking sector regulatory risks.
Stock #9: The Ensign Group, Inc. (ENSG)
| Metric | Value |
|---|---|
| Market Cap | $9,670.6M |
| Quality Rating | 6.3 |
| Intrinsic Value | $103.2 |
| 1Y Return | 20.2% |
| Revenue | $4,829.5M |
| Free Cash Flow | $289.5M |
| Revenue Growth | 18.3% |
| FCF margin | 6.0% |
| Gross margin | 15.7% |
| ROIC | 7.2% |
| Total Debt to Equity | 101.6% |
Investment Thesis
The Ensign Group, Inc. (ENSG), $9,670.6M market cap, Quality rating 6.3, intrinsic value $103.2. Revenue $4,829.5M, FCF $289.5M (6.0% margin), gross margin 15.7%, ROIC 7.2%, growth 18.3%, 1Y return 20.2%, debt 101.6%. Strong growth suits healthcare services.
ENSG offers growth insights in skilled nursing and rehab.
Key Catalysts
- High revenue growth 18.3%.
- Solid 1Y return 20.2%.
- Steady FCF generation.
- Aging population tailwinds.
Risk Factors
- Higher debt 101.6%.
- Lower ROIC 7.2%.
- Healthcare reimbursement risks.
Stock #10: Applied Industrial Technologies, Inc. (AIT)
| Metric | Value |
|---|---|
| Market Cap | $9,654.1M |
| Quality Rating | 7.1 |
| Intrinsic Value | $188.9 |
| 1Y Return | -1.0% |
| Revenue | $4,754.0M |
| Free Cash Flow | $456.8M |
| Revenue Growth | 6.1% |
| FCF margin | 9.6% |
| Gross margin | 30.0% |
| ROIC | 18.1% |
| Total Debt to Equity | 30.5% |
Investment Thesis
Applied Industrial Technologies, Inc. (AIT), market cap $9,654.1M, Quality rating 7.1, intrinsic value $188.9. Revenue $4,754.0M, FCF $456.8M (9.6% margin), gross margin 30.0%, ROIC 18.1%, growth 6.1%, 1Y return -1.0%, debt 30.5%. Distributor strength evident.
AIT provides industrial parts exposure with quality metrics.
Key Catalysts
- High quality rating 7.1.
- Strong ROIC 18.1% and FCF.
- Moderate revenue growth.
- Diversified industrial demand.
Risk Factors
- Negative 1Y return -1.0%.
- Cyclical manufacturing exposure.
- Margin pressures from competition.
Portfolio Diversification Insights
These 10 mid-cap stock picks span industrials (AOS, WTS, GNRC, MOD, AIT), professional services (TTEK), apparel (GIL), financials (WTFC, WAL), and healthcare (ENSG), creating balanced sector allocation: ~50% industrials for growth, 20% financials for yield potential, 10% each in others. High-ROIC leaders like GIL 27.6% and WTFC 35.5% complement cash-rich names like AOS, reducing correlation risks. WAL's zero debt offsets leveraged peers, while growth engines (MOD 80.2% 1Y return, ENSG 18.3% revenue) enhance returns. This mix targets 10-15% portfolio allocation for value investors seeking undervalued stock watchlist diversification.
Market Timing & Entry Strategies
Consider entry during sector pullbacks, such as industrials on economic slowdowns or financials amid rate cuts, monitoring intrinsic value gaps (e.g., WTS at $233.5). Dollar-cost average into high-quality picks like AIT or GIL over 3-6 months, using ValueSense screeners for ROIC >15% confirmation. Track revenue growth trajectories (e.g., GIL's 19.1%) for momentum, avoiding overbought signals post strong 1Y returns like MOD's 80.2%. Position sizing: 5-10% per stock, rebalancing quarterly based on FCF trends.
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FAQ Section
How were these stocks selected?
These mid-cap picks were curated via ValueSense's screener, focusing on market caps ~$9-10B, quality ratings >5.5, high ROIC, and intrinsic value upside, emphasizing FCF and growth metrics for undervalued opportunities.
What's the best stock from this list?
WTS stands out with 7.2 quality rating, 44.7% 1Y return, and $233.5 intrinsic value, but GIL's 27.6% ROIC and WTFC's 35.5% ROIC offer strong alternatives based on specific criteria like margins or growth.
Should I buy all these stocks or diversify?
Diversification across sectors (industrials, financials, healthcare) is key; allocate 5-10% per stock rather than concentrating, using portfolio insights to balance high-return (MOD) and stable (AOS) names.
What are the biggest risks with these picks?
Key concerns include debt levels (e.g., ENSG 101.6%), negative FCF (WAL), revenue stagnation (TTEK), and sector cycles; monitor macroeconomic factors like rates impacting financials.
When is the best time to invest in these stocks?
Optimal timing aligns with dips below intrinsic values (e.g., GNRC at $221.2), quarterly earnings confirming growth, or broader market corrections, employing gradual entry strategies.