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Is Zai Lab Limited (ZLAB) the Best Performing Mid Cap Stock to Buy According to Analysts?

We recently published a list of 10 Best Performing Mid Cap Stocks to Buy According to Analysts. In this article, we are going to take a look at where Zai Lab Limited (NASDAQ:ZLAB) stands against other best performing mid cap stocks to buy according to analysts.

On February 7, Simeon Hyman, Global Investment Strategist at ProShares Advisors, appeared on CNBC to discuss the upcoming jobs report and its expected impact on the market. He believes that the market will hold up, and particularly cites mid-cap stocks as an optimal balance for risk and return. He noted that the economy has shown strength in various sectors, such as the ISM manufacturing index, which recently beat expectations. This broadening of economic growth suggests that the jobs numbers might be decent. Hyman also highlighted the positive earnings growth in the S&P 500, with about three-quarters of companies reporting a 12% year-over-year increase, which is encouraging news.

Recently, the mega-cap tech stocks have shown some weakness despite the overall market being on pace for a winning week. Hyman observed that while this broadening of market performance is positive, it also indicates risk, given that the tech sector still accounts for over 30% of the S&P 500 and remains in the red for the year. His word of the day was mid-caps, which he believes are historically the sweet spot in the market. Mid-caps have outperformed both large and small-cap stocks over the decades. Currently, mid-caps are undervalued, offering investors about $0.50 on the dollar, a situation that hasn’t occurred with small caps despite their underperformance. The key advantage of mid-caps is their earnings growth, which sets them apart from small-caps. When discussing mid-caps versus small caps, Hyman highlighted that mid-caps also have a strong domestic focus, with about 75% of their revenues coming from domestic sources. This is similar to small caps but with a crucial difference: mid-caps generally offer higher quality than small caps, lacking the losses and negative earnings often seen in small-cap companies. This makes mid-caps an attractive option for investors looking for stable growth.

Methodology

We used the Finviz stock screener to compile a list of the best-performing mid-cap stocks that were trading between $2 billion and $10 billion. We then picked the top 10 stocks with year-to-date gains higher than 20% and an average upside potential of over 25%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.

Note: All data is as of February 24.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A doctor examining an X-ray or MRI scan to diagnose a neurological disorder.

Zai Lab Limited (NASDAQ:ZLAB)

Year-to-Date Performance as of February 24: 25.75%

Upside Potential as of February 24: 52.30%

Number of Hedge Fund Holders: 26

Zai Lab Limited (NASDAQ:ZLAB) develops and commercializes innovative therapies across oncology, autoimmune disorders, infectious diseases, and neuroscience. With a portfolio of approved products and a pipeline of novel candidates, it uses strategic collaborations to bring transformative treatments to patients in China and globally.

Its primary growth engine is VYVGART, which is a treatment for generalized myasthenia gravis (gMG) in China. The drug’s commercial success is evident in its Q3 2024 net product revenue of $27.3 million, which is an increase from $4.9 million year-over-year. This performance positions VYVGART to exceed $80 million in sales for the full year 2024. To date, ~10,000 patients have been treated, and nearly 2,000 healthcare professionals have prescribed it, which highlights its rapid adoption. The company has secured listings at all targeted top-priority hospitals, covering ~65% of the gMG market potential.

The company reported a 47% year-over-year increase in total net product revenue for the third quarter, reaching $101.8 million, driven by VYVGART. This revenue growth, coupled with ongoing efficiency initiatives, has led to a 40% reduction in net loss compared to the previous year. With continued growth projections, Zai Lab Ltd. (NASDAQ:ZLAB) is on track to achieve profitability by the end of 2025.

Overall, ZLAB ranks 2nd on our list of best performing mid cap stocks to buy according to analysts. While we acknowledge the growth potential of ZLAB as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZLAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.

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