Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 13.3% for the sector – higher than the S&P 500’s 7.7% return.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here are two resilient industrials stocks at the top of our wish list and one we’re steering clear of.
One Industrials Stock to Sell:
Silgan Holdings (SLGN)
Market Cap: $4.25 billion
Established in 1987, Silgan Holdings (NYSE:SLGN) is a supplier of rigid packaging for consumer goods products, specializing in metal containers, closures, and plastic packaging.
Why Do We Steer Clear of SLGN?
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5.1% annual revenue growth over the last five years was slower than its industrials peers
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Gross margin of 16.8% reflects its high production costs
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Low free cash flow margin of 1.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Silgan Holdings is trading at $45.92 per share, or 12.1x forward P/E. If you’re considering SLGN for your portfolio, see our FREE research report to learn more.
Two Industrials Stocks to Watch:
Enpro (NPO)
Market Cap: $7.08 billion
Holding a Guinness World Record for creating the world’s largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.
Why Do We Watch NPO?
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Operating margin improvement of 5 percentage points over the last five years demonstrates its ability to scale efficiently
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Earnings per share grew by 16.4% annually over the last five years and trumped its peers
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NPO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Enpro’s stock price of $328.40 implies a valuation ratio of 34.9x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
First Solar (FSLR)
Market Cap: $29.14 billion
Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
Why Should You Buy FSLR?
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Impressive 23.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
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Free cash flow turned positive over the last five years, indicating the company has passed a significant test
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Returns on capital are climbing as management makes more lucrative bets