Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 4.3% has fallen short of the S&P 500’s 7.7% rise.
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 are two industrials stocks boasting durable advantages and one that may face trouble.
One Industrials Stock to Sell:
EnerSys (ENS)
Market Cap: $7.34 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 Does ENS Fall Short?
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Flat unit sales over the past two years imply it may need to invest in improvements to get back on track
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Projected sales growth of 4.1% for the next 12 months suggests sluggish demand
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Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 26.6%
At $201.16 per share, EnerSys trades at 16x forward P/E. If you’re considering ENS for your portfolio, see our FREE research report to learn more.
Two Industrials Stocks to Watch:
AZZ (AZZ)
Market Cap: $4.52 billion
Responsible for projects like nuclear facilities, AZZ (NYSE:AZZ) is a provider of metal coating and power infrastructure solutions.
Why Could AZZ Be a Winner?
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Annual revenue growth of 17.3% over the last five years was superb and indicates its market share increased during this cycle
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Highly efficient business model is illustrated by its impressive 15.5% operating margin, and its profits increased over the last five years as it scaled
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Earnings per share have massively outperformed its peers over the last five years, increasing by 17.5% annually
AZZ is trading at $150.34 per share, or 20.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Waste Management (WM)
Market Cap: $93.64 billion
Headquartered in Houston, Waste Management (NYSE:WM) is a provider of comprehensive waste management services in North America.
Why Does WM Stand Out?
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Market share has increased this cycle as its 10.8% annual revenue growth over the last two years was exceptional
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Offerings are difficult to replicate at scale and result in a premier gross margin of 39%
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Disciplined cost controls and effective management resulted in a strong long-term operating margin of 17.4%
Waste Management’s stock price of $232.58 implies a valuation ratio of 28.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.