Medium rare is how I like my Australian equities

Yet they are typically under owned by investors. Mid-caps offer the best of both small and large caps, representing a mix of established companies that also have solid growth potential. Over the past 12 months, mid-caps have outperformed the broader market (represented by the S&P/ASX 200) by 1.37% as at 31 August 2025. 

Chart 1: Mid-caps’ time-tested outperformance

Source: VanEck. Bloomberg. Data from 1 January 2000 to 26 September 2025. Performance in AUD. You cannot buy an index. Past performance is not indicative of future performance.

Looking ahead, we see three key performance drivers for Australian mid-caps.

1. Supportive macro environment

Mid-caps are more sensitive to changes in the economy compared to large-caps and Australian mid-caps typically outperform the broader market in “risk on” environments, when sentiment is positive and equities are rallying. Australian mid-caps are also overweight industrials and information technology, sectors that tend to do well when economy is expanding.   

Chart 2: Mid-caps typically outperform when the economy expands

Source: VanEck. Bloomberg. Mid cap is S&P/ASX Midcap 50 Index. Performance in AUD. From 30 September 1995 to 22 September 2025. Past Performance is not indicative of future performance.

2. Robust earnings outlook

In the latest earnings season, on a market-weight basis, mid-caps recorded the highest net earnings beats among all market segments, reinforcing their fundamental strength. Furthermore, mid-caps received higher target price revisions from sell-side analysts for the next 12 months, compared to the broader S&P/ASX 200 Index. This paints a favourable earnings and performance outlook for these companies.  

Chart 3&4: Mid cap net beats and 12-month price target revisions

Source: VanEck. Bloomberg. Large cap is S&P/ASX 20 Index. Mid cap is S&P/ASX Midcap 50 Index. Small cap is S&P/ASX Small Ordinaries Index. Net beat rate represents the percentage of companies that reported results above analyst expectations minus the percentage that reported below. Past Performance is not a reliable indicator of future results. As of 31 August.

3. Valuations remain compelling

Australian mid-caps are currently trading at more reasonable levels relative to their long-term averages, and are offering more attractive valuations than large-caps and the S&P/ASX 200, meaning greater potential upside if economic growth continues to strengthen.

Chart 5: 12-month forward price-to-earnings ratio

Source: VanEck. Bloomberg. Large cap is S&P/ASX 20 Index. Mid cap is S&P/ASX Midcap 50 Index. As of 30 September. Forecasts are subject to change and may not be realised

Mid-caps in the spotlight

1. Lynas Rare Earth Ltd (ASX: LYC) – up 116% YTD as of 31 August 2025

While large-cap Australian iron ore miners have been out of favour following the China-driven commodity down cycle, several mid cap critical mineral miners have continued to shine amid elevated geopolitical uncertainty.

The escalation of US-China trade conflicts this year has reignited threats of rare earth export restrictions from China, raising concerns on the sustainability of global supply. As the only major rare earth provider outside of China, Lynas has climbed nearly 116% this year as demand for non-China rare earth metals surged. The company has reported a 38% revenue increase over the second quarter this year, the fastest in the past three years. Moreover, street analysts are forecasting a steep growth of revenue in the near term with gross revenue reaching post-COVID levels by early 2026.

With this context, we remain bullish on this company’s outlook considering geopolitical risk is likely to remain elevated despite on-going tariff negotiations.

Chart 6 & 7: Lynas Rare Earths vs sector performance; Revenue outlook

Source: VanEck. Bloomberg. Currency in AUD. Date as of 31 August 2025. Revenue as of 30 June 2025, with forecasts for the next three quarters. Forecasts are subject to change and may not be realised. Past performance is not indicative of future performance. This is not a recommendation to act.

2. Evolution Mining Ltd (ASX: EVN) – up 82% YTD as of 31 August 2025

Gold hit a record high in September, and it has been one of the best-performing asset classes so far in 2025. Forecasts that the price will exceed US$4,000 are becoming more and more frequent.

With mining cost steady, gold miners have benefited from substantial profit margin expansion. As reflected in Chart 9, Evolution Mining has reported increasing profit margins since the 2024 financial year, with estimated margins stabilising at historical highs of around 25% for the coming two years.

With gold miners still trading at discounts to the spot price of gold and macro drivers likely to remain supportive, the risk-reward continues to skew favourably. Over the coming months, we see further upside potential in gold and quality producers, such as Evolution mining which has reasonable scale, balance sheet strength, and leverage to sustained pricing.

Chart 8 & 9: Evolution Mining vs sector performance and profit margin

Source: VanEck. Bloomberg. Currency in AUD. Date as of 31 August 2025. Net income profit margin as of 30 June 2025, with forecasts for the next two financial years. Forecasts are subject to change and may not be realised. Past performance is not indicative of future performance. This is not a recommendation to act

3. Charter Hall Group (ASX: CHC) – up 65% YTD as of 31 August 2025

Charter Hall Group is a smart player in the A-REIT ecosystem. It operates a relatively capital-light platform that invests across all sub-sectors of real estate. The diversity of its assets has supported a resilient return profile through various economic cycles.

Amid a favourable backdrop of easing interest rates, the company has been one of the top performers within A-REITs this year. The RBA’s three rate cuts in 2025 have meaningfully lifted the valuations of its portfolios. In the latest earnings season, it reported an “inflection-year” FY25 EPS growth of 7.3%, along with a bullish guidance of approximately 11% EPS growth in FY26.

Looking forward, analysts are pricing in around 15% EPS growth over the next 12 months, suggesting further upside potential.

Investing in Australian mid-caps

A way to invest in the Australian mid-cap ‘superstars’ is via the VanEck S&P/ASX MidCap ETF (ASX: MVE). It is the only ASX ETF which tracks the S&P/ASX MidCap 50 Index. MVE offers investors a portfolio that includes a wide range of emerging large companies across sectors including healthcare, industrials, resources, technology, energy and more.

Key risks:

An investment in our mid-caps ETF carries risks associated with: financial markets generally, individual company management, industry sectors, fund operations and tracking an index. See the VanEck S&P/ASX MidCap ETF PDS and TMD for more details.

MVE is likely to be appropriate for a consumer who is seeking capital growth and a regular income distribution, intending to use the product as a minor or satellite allocation within a portfolio, has an investment timeframe of at least 5 years, and a high risk/return profile.