Whether you see them or not, industrials businesses play a crucial part in our daily activities. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn - over the past six months, the industry has pulled back by 6.2%. This drop was disheartening since the S&P 500 held steady.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one resilient industrials stock at the top of our wish list and two we’re swiping left on.
Two Industrials Stocks to Sell:
Greenbrier (GBX)
Market Cap: $1.74 billion
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE:GBX) supplies the freight rail transportation industry with railcars and related services.
Why Are We Wary of GBX?
-
Sales trends were unexciting over the last five years as its 2.5% annual growth was below the typical industrials company
-
Gross margin of 13% reflects its high production costs
-
Free cash flow margin shrank by 13.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Greenbrier’s stock price of $56.19 implies a valuation ratio of 5.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than GBX .
Hexcel (HXL)
Market Cap: $4.65 billion
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE:HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Why Are We Cautious About HXL?
-
Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last five years
-
Earnings per share have contracted by 10.5% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
-
ROIC of 5.2% reflects management’s challenges in identifying attractive investment opportunities
At $57.28 per share, Hexcel trades at 24.2x forward price-to-earnings. To fully understand why you should be careful with HXL, check out our full research report (it’s free) .
One Industrials Stock to Watch:
Parker-Hannifin (PH)
Market Cap: $80.04 billion
Founded in 1917, Parker Hannifin (NYSE:PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Are We Positive On PH?
-
Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
-
Earnings per share have massively outperformed its peers over the last five years, increasing by 15.8% annually
-
Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Parker-Hannifin is trading at $619.30 per share, or 21.8x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free .
Stocks We Like Even More
The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.
Get started by checking out our Top 5 Strong Momentum Stocks for this week . This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free .
