Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 18.6% over the past six months. This drop was worse than the S&P 500’s 11% loss.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, 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:
ChargePoint (CHPT)
Market Cap: $264.2 million
The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE:CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.
Why Does CHPT Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.6% annually over the last two years
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $0.58 per share, ChargePoint trades at 0.6x forward price-to-sales. If you’re considering CHPT for your portfolio, see our FREE research report to learn more.
Hillenbrand (HI)
Market Cap: $1.41 billion
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Is HI Risky?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 7% annually while its revenue grew
- Free cash flow margin shrank by 8.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
Hillenbrand’s stock price of $19.99 implies a valuation ratio of 6.5x forward price-to-earnings. To fully understand why you should be careful with HI, check out our full research report (it’s free).
One Industrials Stock to Buy:
EMCOR (EME)
Market Cap: $15.55 billion
Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services
Why Will EME Beat the Market?
- Annual revenue growth of 14.7% over the past two years was outstanding, reflecting market share gains this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 62.4% exceeded its revenue gains over the last two years
- Improving returns on capital reflect management’s ability to monetize investments
EMCOR is trading at $342.02 per share, or 14.7x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.