Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 12.5% return over the past six months has topped the S&P 500 by 7.6 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. With that said, here are three industrials stocks we’re steering clear of.
Byrna (BYRN)
Market Cap: $141.3 million
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ:BYRN) is a provider of non-lethal weapons.
Why Are We Wary of BYRN?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Push for growth has led to negative returns on capital, signaling value destruction
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Byrna is trading at $6.24 per share, or 18.9x forward EV-to-EBITDA. To fully understand why you should be careful with BYRN, check out our full research report (it’s free).
Enviri (NVRI)
Market Cap: $1.59 billion
Cooling America’s first indoor ice rink in the 19th century, Enviri (NYSE:NVRI) offers steel and waste handling services.
Why Do We Avoid NVRI?
- Sales tumbled by 2.7% annually over the last two years, showing market trends are working against its favor during this cycle
- Negative free cash flow raises questions about the return timeline for its investments
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Enviri’s stock price of $19.23 implies a valuation ratio of 10.6x forward EV-to-EBITDA. If you’re considering NVRI for your portfolio, see our FREE research report to learn more.
Enphase (ENPH)
Market Cap: $4.66 billion
The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ:ENPH) manufactures software-driven home energy products.
Why Are We Out on ENPH?
- Sales tumbled by 19.8% annually over the last two years, showing market trends are working against its favor during this cycle
- Free cash flow margin shrank by 15.2 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
At $35.40 per share, Enphase trades at 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than ENPH.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.