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. The market seems to be debating where we are in the cycle as the industrials stocks were flat over the past six months. At the same time, the S&P 500 rose by 4.1%.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one industrials stock poised to generate sustainable market-beating returns and two that may face trouble.
Two IndustrialsStocks to Sell:
EnerSys (ENS)
Market Cap: $3.48 billion
Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE:ENS) manufactures various kinds of batteries for a range of industries.
Why Is ENS Not Exciting?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.6%
- Free cash flow margin shrank by 5.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
EnerSys’s stock price of $88.69 implies a valuation ratio of 8.7x forward P/E. Read our free research report to see why you should think twice about including ENS in your portfolio.
Stanley Black & Decker (SWK)
Market Cap: $10.85 billion
With an iconic “STANLEY” logo which has remained virtually unchanged for over a century, Stanley Black & Decker (NYSE:SWK) is a manufacturer primarily catering to the tool and outdoor equipment industry.
Why Do We Steer Clear of SWK?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share fell by 8.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.7 percentage points
At $70.44 per share, Stanley Black & Decker trades at 13.1x forward P/E. Check out our free in-depth research report to learn more about why SWK doesn’t pass our bar.
One Industrials Stock to Watch:
Allison Transmission (ALSN)
Market Cap: $7.33 billion
Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Does ALSN Stand Out?
- Offerings are mission-critical for businesses and result in a best-in-class gross margin of 47.7%
- Excellent operating margin of 28.8% highlights the efficiency of its business model, and its rise over the last five years was fueled by some leverage on its fixed costs
- Strong free cash flow margin of 20.2% enables it to reinvest or return capital consistently
Allison Transmission is trading at $87.46 per share, or 8.5x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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